Navigating U.S.-China Trade War: Mexico’s Economic Diplomacy in Perspective

Introduction

The early decades of the 21st century have witnessed China’s growing involvement in trade and investment across Latin America and the Caribbean (LAC). This increased economic presence of the Asian giant has also impacted LAC countries’ relations with the United States, the traditionally dominant power in the region. The escalation of the U.S.-China trade war, particularly under the Trump administration (2017–2021), has generated outcomes influenced by both internal and external factors within respective countries.

Mexico, a Latin American nation with the closest economic ties to the United States, due to its geographical proximity and significant economic integration since the late 1990s, faces new dynamics in terms of bilateral relationship with its northern neighbor. For one thing, Mexico presents a unique case due to its historically dependent relations with the United States, formalized through the North American Free Trade Agreement (NAFTA) and later modernized in the U.S.-Mexico-Canada Agreement (USMCA). The USMCA, which resulted from seven rounds of negotiations among the three governments, was signed on November 30, 2018, and has been in effect since July 1, 2020. For another thing, the new component — China’s expanding presence in the Mexican economy — could either strengthen or complicate Mexico-U.S. relations.

The paper aims to examine the impact of China’s role in the Mexican economy within the framework of the Mexico-U.S. bilateral relationship amid the U.S.-China trade war. It argues that this trade war augments Mexico’s participation in the U.S. market through the USMCA. Recent data¹ from the U.S. Bureau of Economic Analysis indicate that Mexico has surpassed China to become Washington’s top trading partner. The new rules of origin and labor provisions under the USMCA give Mexico a greater advantage in accessing the U.S. market and enhance the country’s appeal to foreign companies for nearshoring despite the asymmetrical nature of Mexico-U.S. relations.

The paper conducts a literature review of the historical evolution of Mexico’s foreign policy since economic liberalization in the 1980s. Empirical analysis is also made based upon economic and trade data from Comisión Económica para América Latina y el Caribe (CEPAL),² Mexico’s Ministry of Economy, and the U.S. Bureau of Economic Analysis. It is structured into three sections, in addition to introduction and conclusion. The first part will elaborate the rise of Mexico’s economic diplomacy since its economic liberalization. The second part looks into the implication of U.S.-China trade war on Mexico, particularly how Mexico can benefit from the USMCA’s modifications, with an analysis of the rules of origin and labor standards in the automotive industry. The third part examines China’s expanding role in Mexico’s economy by presenting data on Mexico’s trade with China and the U.S., and foreign direct investment (FDI) indicators from the 21st century. The paper concludes that Mexico has capitalized on the U.S.-China trade war under the new rules of origin agreed upon in the USMCA, compelling several companies to relocate their production activities to Mexico due to lower costs and better market connectivity. Meanwhile, the prohibition stipulated in the USMCA against signing a trade agreement with a non-market economy did not hinder the bilateral trade between Mexico and China which has instead strengthened over past years, as evidenced by statistics.

The Rise of Mexico’s Economic Diplomacy

Understanding international relations involves analyses of variables and internal and external policies made by state and non-state actors.³ These factors influence the construction of foreign policy through pressure and/or advocacy. Since the emergence of globalization and regionalization in the 1980s, scholars such as Held, Rosenau, and Putnam agree that foreign policies have changed due to the presence of various power groups within the state (transgovernmental) and non-state actors.⁴ Held discusses a dispersion in foreign policy decision-making processes. Internally, a transgovernmental network involving executive branches, legislative branches, administrative bureaucracies, and groups with strong economic interests influences international policy debates. Externally, financial regulators — such as central bank presidents, stock market regulators, insurance supervisors, and antitrust officials — play a decisive role in reshaping state functions.⁵ Rosenau notes that domestic and foreign policies are increasingly interconnected, complicating their separation due to established links between state and non-state actors.⁶

In Mexico, foreign policy has also evolved since the adoption of the market economy model. Various factors contributed to the evolution of Mexico’s international relations. Throughout the 20th century, Mexico maintained a state-centric foreign policy, as outlined in Article 89 of the Constitution, which set the guiding principles of Mexico’s foreign relations. However, the economic opening model initiated in 1986 integrated Mexico into a global system with strategies and commitments distinct from those in the Mexican Constitution. This shift altered economic structures but did not change the legal institutions supporting external relations.

Ever since the economic liberalization, Mexico’s foreign policy, driven mainly by the Foreign Ministry, has increasingly taken on pragmatism. This shift is characterized by an ambivalent multilateralism where decision-making is reassessed and dispersed across a transgovernmental network involving other governmental elites and, to a lesser extent, non-governmental entities. Additionally, economic and political liberalization processes shaped foreign policies. González describes Mexico’s adaptation to globalization as reactive, uneven, partial, and sometimes contradictory. The reactiveness and unevenness are due to the unilateral economic opening and a string of bilateral and multilateral agreements aimed at expanding export markets. He pointed out that this has led to increased social exclusion and inequality rather than significant growth. Partiality and contradiction are due to resistance in adapting to interactions with other international actors, particularly civil and business or trade organizations.

A notable change in Mexican foreign policy was the emphasis on economic statecraft. Initially, the official discourse separated traditional diplomacy which addressed geopolitical issues from economic policy viewed as crucial for development. This divergence highlighted Mexico’ struggle to adapt to the new global dynamics and contradictions in foreign policy redefinition. Economically, a reactive bilateral policy led to the NAFTA, which evolved into a more multilateral and active strategy with various trade agreements. Both approaches linked domestic and foreign policies by connecting economic development and growth with external relations. However, in areas such as democracy, human rights, and security, Mexico remained cautious or passive, addressing these issues on the international stage without internal structural changes.⁷

Decision-making underwent institutional and progressive restructuring, starting in 1985 under the International Monetary Fund (IMF) recommendations, which advised downsizing the diplomatic corps. As a result, the Economic Sub-Secretariat of the Ministry of Foreign Affairs was dismantled, and the Secretariat of Commerce and Industrial Development (now the Ministry of Economy) took a leading role in trade negotiations, with Mexican diplomacy focusing on coordination. Building on this, Mexican trade missions are now structured with a multi-ministerial commission according to negotiation topics, led by Ministries of Economy and/or Finance. Another significant bureaucratic restructuring in decision-making occurred during the Carlos Salinas de Gortari government (1988–1994) with the creation of the Office of the President of the Republic, which included five specialized cabinet-level ministries (economy, agriculture, social development, foreign policy, and national security) led by Secretaries of State, along with the President and the head of this office. This structure placed international trade negotiations under the economy ministry rather than the foreign ministry.⁸

As economic liberalization deepened, Mexico’s internal development increasingly depended on external connections. The country’s economic policy became pragmatic and institutionalized, particularly with the United States following the implementation of the NAFTA in 1994. The institutionalization of Mexico-U.S. relations led to economic alignment and Washington’s support after the 1995 financial crisis, consolidating the Mexico-U.S. Commission as the most important mechanism in Mexico’s external relations. NAFTA negotiations facilitated Mexico’s entry into other international institutions and bolstered governing elites’ case for and position in advancing the economic project. Internationally, Mexico’s relations focused primarily on the United States to the extent of almost neglecting Canada. North American integration has not served to form coalitions or enhance Mexico’s negotiating capacity in multilateral trade matters. Starting from 1995, Mexico transitioned its pragmatic bilateral and reactive foreign policy to active and multilateral pragmatism/diplomacy.⁹ The Mexican government engaged with developed countries, such as the European Union, Japan, and Israel, as well as emerging Latin American economies. This pragmatic approach resulted in 14 free trade agreements, though the NAFTA, now the USMCA, remains the most significant. The discourse on diversifying external relations has continued across successive administrations without achieving significant success. Nonetheless, the rise of economic diplomacy in Mexico offers a framework for understanding Mexico’s relationship with the two major powers, namely, the United States and China.

U.S.-China Trade War: Implications for Mexico

Both China and Mexico have distinguished themselves as significant trading partners of the United States (Fig. 1). Following the 2008 financial crisis, U.S. imports from China saw a substantial increase; since the early 21st century, on average, Chinese imports have represented 14% of total U.S. trade. However, in the second decade, China’s share rose to 17%, while U.S. exports to China were 7%. Figure 1 also shows the U.S. trade deficit has continue to widen after the financial crisis.

One of the arguments explaining this increase in U.S. trade deficit stems from China’s accession to the World Trade Organization (WTO) in 2001, accelerating commercial exchanges. Imports from China have been more dynamic compared to U.S. exports to the Asian market. Particularly, trade from China increased significantly from 2004 onward, widening the U.S. deficit during the second decade of the 21st century, and triggering the trade conflict between both countries. Figure 1 also shows a persistent U.S. trade deficit with Mexico. During the analyzed period, on average, the deficit with China was 253 billion dollars, whereas with Mexico, it was 67 billion. The average negative balance with China since 2010 was 309 billion dollars, while the trade deficit with Mexico averaged 70 billion in the second decade of the 21st century and 130 billion from 2020 to 2023.¹¹ Regarding U.S. trade with Mexico, there was also growth in U.S. imports which reached 12% of the total during the second decade of the 21st century, while U.S. exports to Mexico were 11% during the same period but have increased to an average of 26% in the last three years.

The Trump administration launched a trade war against Beijing in a bid to fundamentally change the bilateral trade ties. Joseph Stiglitz argued that though Trump’s aim was to reduce the trade deficit to improve employment and wages for his voters, under any scenario, as shown in Fig. 1, the trade deficit would continue to increase due to structural elements and U.S. market competitiveness. Stiglitz pointed out that Trump’s view of trade negotiations was zero-sum, similar to real estate negotiations, and should be backed and facilitated by U.S. power. However, the world is globalized, which means gains for one are losses for another; markets are highly competitive, with established rules for international trade, and are repetitive games. A bad move is punished in subsequent plays, meaning actors would cease to trust Trump, as evidenced by his failed reelection bid. Moreover, trade negotiations imply offering advantages to both parties, not just one, as demonstrated by the renegotiation of NAFTA with Mexico and Canada. An interesting point mentioned by Stiglitz is that Trump did not take into account the fact that China’s control over its trade and investment was greater than the intervention exerted by the U.S. government. And China could hit low-income customers in the United States by taking retaliatory tariff measured. China also had greater control over its imports; for example, it could discourage purchases.¹² According to Enrique Dussel Peters, China has rapidly acquired technology (in high-speed trains, 5G, semiconductors, artificial intelligence, electric vehicles), as well as credits and development in financial sectors, reflecting increased the competitiveness of its products on the world markets.¹³

Some U.S. politicians also argue that China has grown at the expense of its competitors, defying widespread U.S. expectations of economic and political liberalization.¹⁴ According to Alicia Puyana, Trump’s policy represented the abandonment of the “supranational internationalism” strategy based on U.S. leadership in multilateral organizations since World War II, and a transitioning to “aggressive unilateralism,” linking national security and trade policy.¹⁵ Trump’s toughening stance toward China led to the adoption of commercial sanctions against the Asian country. Measures included restrictions imposed by the Departments of State, Justice, Defense, and Commerce, accusing some Chinese companies of using forced labor, and Huawei and ZTE of posing threats to U.S. security. In strategic sectors such as semiconductors, the U.S. government banned the sale of advanced chips and machines to China. These measures may limit the production and supply of chips on the domestic market due to the strong economic interdependence between the United States and China. Therefore, simultaneously, the U.S. government launched programs to incentivize domestic production of chips and semiconductors, ensuring federal resources for companies with innovation potential.

Against the backdrop of U.S.-China trade war, the modernization of NAFTA became a key aspect of U.S. trade policy under the Trump administration. Renegotiating trade agreements was part of a trade policy focused on anti-globalization and protecting national interests, often expressed through strong anti-Mexican rhetoric. This policy also included distancing from the WTO and favoring bilateral trade agreements, such as the withdrawal from the Trans-Pacific Partnership (TPP) in January 2017, alongside trade confrontations with China.¹⁶

Former U.S. Trade Representative Robert Lighthizer argued that trade agreements were designed to prioritize labor dignity, environmental compliance, and ending subsidies that allowed China to access technology.¹⁷ He viewed the USMCA as a “model agreement” for future U.S. negotiations. The seven rounds of negotiations, concluded in September 2018, were marked by Trump’s threats to impose tariffs on Mexico and Canada’s steel and aluminum sectors to pressure both countries into accepting U.S. conditions. Even after the negotiations were concluded, trade pressures continued, especially regarding Mexico’s handling of migration flows at U.S. southern border.¹⁸ The U.S. preference for bilateral negotiations, despite the agreement being trilateral, was a strategy to further its interests.¹⁹

The USMCA introduced new regulations not covered by NAFTA, including digital trade, small and medium-sized enterprises, intellectual property, and other areas.²⁰ While the primary criticism from the U.S. government was the trade deficit with Mexico and the country’s labor conditions, such as low wages and flexible contracts, the agreement aimed to reposition North America in relation to China. Unlike NAFTA, the UMSCA includes a clause in Chapter 32 that is widely believed to be “anti-China,” though it does not explicitly name China. This clause requires member countries to notify each other and reach agreement if they are negotiating a free trade deal with non-market economies. The three-member countries do not recognize China as a market economy.

The principal modification introduced by the USMCA is new regulations for the automotive industry. The sector is critical for job creation and technological innovation. The Regional Value Content (RVC) rules stipulate that to export a vehicle tariff-free, it must contain at least 75% of the net cost of essential parts, 70% of primary parts, and 65% of complementary parts manufactured in North America.²¹ These percentages are higher than the 62.5% required under NAFTA. The expectation was that this new rule would strengthen North American regional supply chains and encourage companies to return to the region, reducing imports from China.

In addition to the RVC, the USMCA introduced the Labor Value Content (LVC). According to the LVC, 40–45% of light vehicles must be manufactured by workers earning at least $16/h. The objective was to pressure the Mexican government to implement a policy of minimum wage increases and to prevent multinational companies from using Mexico as a platform for production with cheap labor. According to Graciela Bensusán and Kevin J. Middlebrook, the policy of increasing the minimum wage in Mexico during the administration of Andrés Manuel López Obrador (2018–2024) represents a political shift from external to internal, based on a logic of increasing linkage between labor relations and tradeagreements, favoring labor organizations in the United States, which will have a more active role in monitoring labor conditions in Mexico.²²

According to data from the Mexican government, the minimum wage registered a real increase of 86.6% between May 2019 and May 2024, the highest increase among OECD countries, aimed more at benefiting traditionally neglected worker sectors than responding to external pressure.²³ However, the policy remains insufficient to narrow the wage gap between Mexico, the United States, and Canada. Ana Covarrubias Velasco argues that although significant wage increases have been recorded in Mexico’s automotive industry, they are still far from reducing the wage gap among USMCA member countries.²⁴ Additionally, Mexico remains the country with the lowest annual wage among OECD countries suggesting that changes implemented in the automotive industry have not spread to other sectors of the economy, although the increase in the minimum wage has been a key factor in lifting more than 5 million Mexicans out of poverty.²⁵

It is necessary to emphasize that, as observed in regional content guidelines, the new labor rules are stricter than those in NAFTA since the previous agreement did not reference hourly minimum wage. Furthermore, the changes aim to ensure greater enforcement of rules. According to the USMCA, failure to comply with rules could lead to a labor complaint in the Rapid Response Labor Mechanism, which the defendant state must investigate to avoid commercial retaliation — a possibility not foreseen in NAFTA.²⁶ The Mexican government’s fear is the political use of the Mechanism by the United States, demanding investigations into labor relations in companies located in the national territory and potentially imposing tariffs.²⁷

The USMCA also drove the ratification of the 2019 Labor Reform, originating from Mexico’s entry into the TPP. The reform envisages the creation of federal centers specialized in resolving labor disputes and ensuring contract registration, as well as freedom of association and direct elections for labor organization representatives (union democracy) as established by the International Labour Organization. In 2018, the Mexican Congress ratified Convention 98 concerning the right to organize and collective bargaining, which was incorporated into the Reform.²⁸

Regarding foreign investments, the USMCA replaced NAFTA’s investor-state mechanism by arbitration panels depending on the country of origin and destination of investments.²⁹ As a result, the mechanism for resolving disputes between the United States and Canada is extinguished and, in the case of Mexico-United States, the possibilities for a foreign investor to sue the Mexican State are severely limited, making the country more insecure for investors and favoring flows to the United States.³⁰ In the event of disputes between Mexico and the United States, investors will need to appeal to the courts of the receiving countries just in specific situations stipulated by the treaty, such as expropriation without compensation and most-favored-nation treatment.

Thus, it can be affirmed that the USMCA imposes internal and external restrictions on Mexico, demanding changes in labor relations in the country and hindering further formalization of relations with China, with whom trade has significantly increased in recent years. In addition to bilateral relations, there is a triangular component between China, Mexico, and the United States, making the Latin American country an attractive destination for investments and new businesses due to its strategic position in North America and its comparative advantages.

China’s Expanding Role in Mexico’s Economy

Mexico’s economy underwent structural changes with processes of economic liberalization that impacted its foreign policy. The opening of the Mexican economy meant that growth became reliant on exports and, therefore, on the pursuit of commercial markets. Figure 2 shows that Mexico’s trade has grown in volume and value, consistent with this trend of economic liberalization that began in the 1980s. From the year 2000 onwards, Mexican annual exports averaged 281 billion dollars, and annual imports averaged 174 billion.³¹

Figure 2 reveals that overall trends in Mexican trade move similarly, making periods of deficit or surplus practically imperceptible. Two significant periods of trade decline stand out: in 2009 and 2020, corresponding to the financial crisis and the COVID-19 pandemic. While both trends were global phenomena, trade under the USMCA, particularly with the United States, is what truly drives Mexico’s trade dynamics.

During the analyzed period, Mexico’s exports to the USMCA region accounted for 85%, with exports to the United States specifically at 77%, while imports from the North American bloc at 54% and imports from the United States at 51%. This trend confirms that Mexico’s primary bilateral relationship is with its North American neighbor. When Mexican trade trends are segmented by decades, it is evident that the first decade of the 21st century was more dynamic compared to the periods of 2010–2020 and 2020–2023. Exports to the USMCA and the United States were 87% and 82%, respectively, during 2000–2010, while in the subsequent decades, they were 83% and 84% toward the USMCA, and 79% and 63% toward the United States. Meanwhile, imports from the USMCA and the U.S. market were also more dynamic during the first decade of the 21st century: 59% and 56%, respectively. For the periods of 2010–2020 and 2020–2023, imports from North America registered 50% and 46%, while imports from the United States were 47% and 44% for both periods.

As Mexico’s trade has grown in value, it is logical that during the period 2020–2023, annual Mexican exports and imports recorded higher growth than in previous periods. On average, during the 2020–2023 period, Mexican exports to the USMCA were 429 billion dollars and 309 billion dollars to the U.S. market, compared to 188 billion dollars and 183 billion, respectively, during the 2000–2010 decade. Imports from the USMCA and the U.S. during the third decade of the 21st century were 234 billion and 222 billion, respectively, compared to 130 billion and 123 billion recorded during the 2000–2010 period, from the USMCA bloc and the U.S. market.³³

China’s entry into Latin American economies began in the 21st century, and the case of trade between China and Mexico is no exception. Chinese trade with Mexico was relatively insignificant in terms of exports during the 2000–2020 period, averaging only about 1.5% of total Mexican exports. However, this percentage has grown to 11% over the last three years. The percentage from the first two decades is similar to the trade Mexico has with some Latin American countries. However, it is notable that Mexican exports to China have shown significant growth in the last three years (see Fig. 2). Meanwhile, imports from China have grown significantly since the second decade of the 21st century, accounting for 17% and 19% of total Mexican imports during the periods of 2010–2020 and 2020–2023, respectively, compared to the 8% registered during the first decade of the 21st century.

Clearly, due to the size of the Mexican market compared to the U.S. market, the commercial importance of the U.S. is more representative for the Mexican economy. It is evident that both imports from and exports to the Mexican market are significant for U.S. commercial dynamics. This is especially apparent when comparing these trends with those related to China.

It is interesting to note that the persistence of the U.S. trade deficit with China has been influenced by the trade war during the Trump presidency. This conflict has allowed the Mexican economy to position itself as the main trading partner, particularly from 2023 onwards, primarily due to the sanctions imposed by the United States on Asian products, which improved Mexico’s competitive position in the U.S. market. This Mexican advantage has been leveraged not only due to the trade dispute between the two major trading powers but also coincided with the recovery of trade after the pandemic and the initiation of the USMCA.

Although trade between Mexico and China remains relatively insignificant for the Mexican trade balance, two notable trends can be pointed out that align with U.S. trade dynamics. First, imports from China began to grow starting in 2004, and second, Mexico’s trade deficit with this Asian economy has decreased in recent years. As mentioned, there has been an increase in Mexican exports to China (see Fig. 2). These observations in U.S. and Mexican trade imply an advantage that Mexico appears to capitalize on amid the U.S.-China trade war. Moreover, it is interesting to note that despite the prohibition stipulated in the USMCA against signing a trade agreement with a non-market economy, Mexican exports to China have increased between 2021 and 2023.

From the perspective of foreign policy, economic liberalization has accentuated Mexico’s prioritized relationship with the United States, initially through NAFTA and subsequently with the implementation of the USMCA. The negotiation of the USMCA clearly reflected the demands of different interest groups in Mexico, particularly from the automotive sector, to maintain commercial priorities despite new impositions, especially regarding regional content. The renegotiation of the new trade agreement was not necessarily a sign of government autonomy but rather an economic necessity for Mexico to maintain a prioritized economic relationship with its neighbor.

Meanwhile, Mexico-China relations have also been utilized with commercial liberalization in recent years despite the U.S.-China trade war, reflecting a pragmatic and reactive policy.⁹ It should be noted that there has been closer cooperation between Mexico and China since the pandemic, as China was the only country to sell medical supplies to Mexico when all borders were closed.³⁴ Moreover, direct flights between Mexico City and Shanghai continued to operate as an air bridge for the supply of medical materials required by the Mexican society.

China’s Belt and Road Initiative (BRI) has emerged as a major source of financing from China to the world. China’s outward FDI increased from 5.5% of the global stock in 2000 to 11.3% in 2019.³⁵ In Latin America, Chinese financing began in the first decade of the 21st century when some Latin American countries, such as Argentina and Venezuela, were excluded from international markets; China stepped in to purchase bonds from these countries’ debts. Since 2010, the presence of Chinese companies in LAC has deepened through mergers and acquisitions, new investments, and construction contracts.³⁶ However, a decrease in China’s overseas investments has been observed since 2016, attributed to various factors including sectoral imbalances (e.g., hospitality versus real estate), reduced international reserves, and a shift towards national priorities. Consequently, regulations were implemented that led to a slowdown in investment between 2017 and 2019. According to FDI trends, mergers, and acquisitions have been pivotal for the Latin American region, with Chinese investments representing 16.3% from 2015 to 2019. In the early 21st century, Chinese investments were directed toward sectors such as hydrocarbons, mining, metallurgy, agriculture, and fishing. From 2010 onwards, these investments shifted toward electricity, infrastructure (including transport and ports), and to a lesser extent, manufacturing, the financial sector, and information and communication technologies.³⁷

Mexico is one of the few economies in the region where investment by origin can be classified in detail. Although Chinese investment in Mexico, like trade, remains marginal, it exhibits distinct trends compared to U.S. investment. From 2006 to 2023, 43% of FDI in Mexico came from the United States, while only 1% came from China. The U.S. economy holds a capital stock of over 232 billion dollars in Mexico, whereas Chinese capital amounts to 2.4 billion.³⁸

However, when examining the types of investment made by both countries in Mexico, Chinese investments present an intriguing component due to their composition of new investments. This is particularly evident during the 2020–2023 period, with an average annual amount of 291 million dollars. This trend is associated with the nearshoring of foreign capital, driven by the economic consequences of the pandemic and the new rules established by the USMCA. Furthermore, Chinese investment has increased during this period as a result of trade war and U.S. sanctions imposed on the Asian economy. This suggests that Mexico has capitalized on the trade war, enhancing its investment relationship with China, while maintaining the United States as its primary investor.

In addition to the BRI, the COVID-19 pandemic and the USMCA, Zhao Yajie explains that Chinese investments are influenced by reduced transportation costs, increased profits, and the transformation and upgrading of local industries (such as data infrastructure).⁴⁰ These factors help Chinese firms seek new markets for their products, especially small and medium-sized enterprises, and new technology-related talent.⁴¹ An important consideration for electric vehicle companies is the abundance of lithium, a natural resource found in Mexican territory. Chinese firms require control over this resource to safeguard their production chain. Chinese investment in Mexico follows the same localization patterns in federal entities and economic activities as the rest of FDI. On one hand, Mexico City is the primary territory benefiting from Chinese capital, explained by the fiscal direction that most companies register upon entering the Mexican economy (see Fig. 4(a)); meanwhile, in terms of economic activities, manufacturing is the primary beneficiary sector, aligning with Mexico’s export-oriented profile (see Fig. 4(b)).

In other regions of Mexico, the distribution pattern of Chinese investment mirrors that of overall FDI, with the states of Jalisco and Nuevo León standing out due to their economic activities. In Jalisco, Chinese capital is attracted by existing infrastructure and human capital for various sectors, including energy (e.g., Solarever), electronics (e.g., Invertronics and Zhongli Group), metal-mechanical (e.g., Minglida and Haitan), and automotive (e.g., Xin Point and Huang yu).⁴³

In Nuevo León, a dedicated industrial park has been developed for Chinese companies; Hofusan Park houses businesses in sectors such as auto parts, technology information, mechanical equipment, electronic appliances, light industry, recycled energy, and materials. Notable companies located in this park include Hisense (home appliances), Man wah (furniture), and Yinlun TDI LCC (batteries and radiators). Spanning 850 hectares, this industrial park is strategically located near the U.S. market.⁴⁴

In the southern part of Mexico, Yucatán has also excelled in attracting Chinese capital. Although not situated in Mexico’s primary manufacturing regions, Yucatán is developing a 1000-hectare industrial park. This industrial hub is a direct result of the nearshoring trend and will accommodate manufacturing companies such as Woodgenix, which specializes in kitchen manufacturing, as well as several pig farms already established in the area.⁴⁵ It is noteworthy that this industrial park is a joint effort between the local government and Holley Global company.

Conclusion

The shift in Mexican foreign policy toward economic statecraft has become increasingly evident, leading to deeper engagement with North America, particularly with the United States, while sidelining efforts to diversify foreign relations with other regions. This policy adjustment includes changes in decision-making processes, involving a comprehensive cross-governmental network that participates in global policy dynamics, enabling Mexico to align itself with emerging trends in the world system.

This paper has demonstrated how Mexico has leveraged the trade dispute between the United States and China, under the new rules established by the USMCA, which favor regional rules of origin. These rules have prompted foreign companies to relocate their production activities, benefiting Mexico through lower production costs and improved market connectivity. Additionally, bilateral trade relations between Mexico and China have strengthened in recent years, as evidenced by statistical data.

Notes