Mexico - China: a Match Made in the USA
Mexico wants Chinese FDI, technology, and payrolls;? China wants Mexican real estate and regulations.? The US has thoughts.? If Trump wins in November, those thoughts will be different.? The easy answer for AMLO was to play both sides and root for China, but Sheinbaum is going to have to make some China decisions - and some US decisions.
End of the Story: The new Sheinbaum administration has a rare opportunity to win at geopolitics - and win big.? If she can come up with a proactive strategy that secures Mexico free access to Chinese FDI (and technology) and reframes US security and border concerns within an integrated, co-equal partnership, then everyone wins.? To do that Sheinbaum needs to step up her international game – managing the demands of both the US and China simultaneously.? It’s unclear if she has the interest OR the ability to pull it off.??
Spoiler alert – Success for this administration runs through Houston.?
Sheinbaum Needs to Drop Anchor ?
Sheinbaum needs to plant her flag now and go public with a comprehensive economic plan for China.? Job #1 is to separate economics from politics.? Mexico will grudgingly allow the US to improve Mexican border and security situations, in exchange for a free hand to manage non-strategic Chinese FDI with its own existing rules.??? And she wants to make this public before November.? Preferably in Houston. ??
China is set to play a big role in Mexico’s international economy, and Sheinbaum needs to make sure it’s a positive one.?? Mexico’s new president is suddenly balancing the interests and risks of two superpowers that don’t get along well.? Playing one side against the other SEEMS like a clever idea, but that could go very badly for Mexico.?
The Mexican Win:
In Sheinbaum’s perfect world - China does its thing, the US does its thing, and Mexico gets good jobs and some B2B sales.? ??
Could Mexico spin its geopolitical good fortune into a stepped-up international role?? Sure.? There is a lot of room for Mexico’s economy to upgrade. ??China is good at just the kind of infrastructure projects that Mexico needs right now, including:?
o?? Lithium refining.? (China is the only one that can refine Mexico’s type of lithium)
o?? Water infrastructure.? In addition to fast trains and big stadiums, China is also good at managing water.
o?? Energy infrastructure.? China does big nuclear, they do solar, they do wind.? They also know how to work with state-owned partners.? ?
What this means to you:? Under AMLO, nearshoring was something that happened to Mexico.? It was good for employment, good for real estate, good for B2B sales – but not a game-changer.? If Sheinbaum follows the same approach, Mexico’s trade policy is likely to be crafted by MNCs and Chinese bureaucrats.? It’s a wasted opportunity for Mexico, but it’s still very workable for you.?
The Chinese Win:
China Inc. wants to avoid punitive tariffs and secure access to the US market.? EVs (electric vehicles) would have been great/will eventually be great – but that’s not what matters.? China’s first choice would be to export surplus production from the Mainland, but setting up new production bases is still “on plan”.??
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What this means to you:? Chinese newcomers need that Mexican “country of origin” designation to avoid the China tariffs, and to meet the RVC (Regional Value Content) requirements to comply with USMCA. ?At first, they will be partnering with Mexicans – then they will compete.? If you’re Old China Hand, you have a brief window to make connections and build relationships.?
The US Win (Biden Edition)
The US has 4 big, interconnected issues with Mexico --? Fentanyl,? Cartels,? Migrants/Border Security, and Chinese Manufacturing.?? ???
A Biden win will mean more of the same for the Sheinbaum.? There will be little pressure to change the SOP, which is good news for Fortune 500 incumbents, well-connected locals, and Chinese investors.?
What this means to you: A second Biden term is likely to be more of the same, which is just fine.? US-Mexican trade relations are good, the mechanisms are in place, and the infrastructure is – by the standards of the US – sufficient.?? There’s a strong likelihood that the USMCA will be renewed in 2026 without much fanfare.? ?
The US Win (Trump Edition)
The list of concerns is the same, but the approach will differ.? The Republicans see the border as a source of crime, danger, and Satan.? The Trump people will be adversarial and aggressive when it comes to Mexico, and it’s likely they will focus on fentanyl and security issues.???
This will probably make Mexico a more challenging environment.? You should review safety best practices and stay current about security when traveling.?? Start inviting key Mexican managers up to the US for meetings and do more on Zoom.? Tijuana and Chihuahua facilities could probably do with a comms hardware upgrade.?
If the US position is considered aggressive, militaristic, or disrespectful (and let’s be honest – there’s a good chance of this), then your relationships in Mexico could suffer.? While Trump was relatively popular in Maquiladora zones, military action will not be.? Many people consider drone strikes to be off-putting, and your Mexican partners are no different.?
USMCA renewal will be a rocky road.? Look for Trump’s team to push for enhanced 32.10 provisions – or more.
Sheinbaum can either try to talk sense into Trump or she can build strong ties to Texas and let sympathetic MAGA businessmen argue on Mexico’s behalf.?
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Final Word:
The Sheinbaum Administration needs to encourage the beneficial elements of Chinese FDI without getting dragged into a geopolitical conflict between the USA and PRC.? ??Sheinbaum may opt to continue AMLO’s strategy of playing both sides against one another, but the risk is that the US and China may end up seizing too much control over the Mexican economy.? She would be better off prepping for a comprehensive negotiation with the US about a new co-equal relationship.? This is the best way for her to prosecute her domestic “social justice” agenda, while at the same time maximizing the benefits of the North American Trade Bloc for Mexicans.?
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Mexico's strategic leverage is immense. The international landscape has transformed significantly since 2016, placing Mexico in a highly favorable position. This makes it challenging for any negotiation not to benefit the country. Mexico is undeniably the ideal partner due to its proximity, robust manufacturing capacity, comprehensive trade agreements, and accessible land, air, and sea routes. Its extensive border further cements its unparalleled advantage. Moreover, for China, Mexico is a strategic nation where investment presence has been limited but holds vast potential. Mexico commands the attention of both its primary trading partner and its main competitor, underscoring its crucial role on the global stage. There is simply no better choice.