By Jennifer Chang

In the past, US manufacturing companies tended to outsource their business to Asian countries like China due to lower labor costs and favorable regulations. However, as more import tariffs are imposed and labor costs in China rise, it has become a less favorable option. Additionally, the escalating economic and political tensions between the two countries have stimulated US manufacturers to look for alternatives to China. Latin American countries such as Mexico, Colombia, and Costa Rica are offering greater benefits to US companies seeking nearshore suppliers. The major industries shifting towards Mexico are food and beverage, automotive, aerospace, medical equipment, and electronics.

Over the past five years, many companies have made many changes to their supply chain networks considering the resourcing and nearshoring of product sourcing and assembly. Nearshoring dramatically changes supply chain partners, shipping processes and delivery times. Mexico has become the largest trading partner of the United States - multiple trade agreements strength the two countries in beneficial trade relationship. From the perspective of labor force, Mexico has low labor costs and a healthy working population structure, while China's labor costs continue to rise and the

aging of the labor force is accelerating. Additionally, Mexico offers a highly skilled and cost-effective talent pool. The quality of Mexico's labor force and senior executives has been steadily improving in recent years as a result of improvements in the country's education levels. U.S. trade with Mexico can reduce transportation costs and shorten lead times for products to reach U.S. markets by road. This provides agility which in turn increases resilience. At the same time, shorter lead times reduce inventory levels, allowing companies to better utilize their working capital and reduce inventory carrying costs. This makes nearshoring to Mexico much better than offshoring to distant countries.

For more than four decades, China has been the factory of the world, but that may soon change as even Chinese companies are shifting their supply chains out of China. Many Chinese manufacturers are actively considering establishing overseas production in response to supply chain challenges and political risks. Mexico is becoming a major relocation location for Chinese manufacturers, especially since the US is a major consumer market. A growing number of Chinese companies are manufacturing goods in Mexico to serve U.S. customers and prevent interferences from further deterioration in U.S.-China relations. Mexico has become so attractive that even China has invested heavily in its manufacturing industry. Major Chinese companies are investing aggressively in Mexico, taking advantage of the expanded North American trade agreement. Chinese companies are setting up factories in Mexico, slapping "Made in Mexico" labels on their goods, and then shipping their products to the United States duty-free. In summary, the trend of Chinese manufacturers shifting their supply chains and investing in Mexico is accelerating. In this era of globalization, both geographic location and cost are important considerations, and Mexico is attractive in both respects. For Chinese companies, investing in Mexico can not only help them expand their business, but also help them diversify their risks and become more competitive and sustainable enterprises.

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