How Chinese firms are using Mexico as a backdoor to the US

Mexico’s increased trade with the US has also come about in part through a second key aspect of nearshoring in the country: US firms setting up Mexican facilities too, sometimes after relocating production from factories in Asia.

Perhaps the standout announcement came from Elon Musk last year, when he unveiled plans for a new Tesla Gigafactory outside Monterrey. However, the electric car company is yet to break ground on the $10bn plant.

And, while Tesla is apparently still committed to the project, it has slowed its plans amid concerns over the global economy, and recent job cuts at the carmaker.

But regarding Chinese investment, some urge caution over Mexico being drawn into the wider geopolitical struggle between the US and China.

“The old rich guy in town, the US, is having problems with the new rich guy in town, China,” says Enrique Dussel of the Centre for China-Mexico Studies at the National Autonomous University in Mexico. “And Mexico – under previous administrations, and in this one – doesn’t have a strategy vis-à-vis this new triangular relationship.”

With elections looming on both sides of the US-Mexico border, there may be new political considerations ahead. But whether it’s Donald Trump or Joe Biden in the White House over the next four years, few expect any improvement in US-China relations.

Mr Dussel thinks nearshoring is better defined by what he calls “security-shoring”, saying Washington has placed national security concerns above all other factors in its relationship with China. Mexico, he argues, must be wary of being caught in the middle.

Amid this tension, Mr Dussel says: “Mexico is putting up a big sign to China saying: ‘Welcome to Mexico!’. You don’t need a PhD to know that this isn’t going to end well for bilateral relations between the US and Mexico in the medium term,” he adds.

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