Nearshoring Strategies for a Trump Presidency: Breaking Down US-Mexico Trade Relations. Part 1 of 2.

It’s time to assess the prospects for the North American Trade Bloc if Donald Trump wins the US Presidency in the upcoming election.

End of the Story:? If Trump wins the US Presidency in November,? US-Mexico trade will definitely be impacted. ??The trade relationship can go in one of two ways.? The positive outcome for nearshorers would be if Mexico positions itself as a friendly, reliable alternative to China as a production base for US business.? But if Mexico is viewed by MAGA influencers as the source of illegal immigrants, drugs, and violent crime we could see the USMCA weakened or abrogated completely.? Front-line decision-makers have to monitor the emerging trade relationship and take action NOW to avoid problems and build a competitive advantage.?

Let’s start by looking at three broad scenarios of US-Mexican trade relations over the next four years.? In Part 2 of this report, we’ll discuss five specific courses of action that international managers can start putting in place right now to minimize risk and extend their competitive advantage.?

Three Scenarios for US-Mexican Trade Relations after a Trump victory in November.?

Let’s examine three possible outcomes for US-Mexican relations in a Trump-Sheinbaum matchup.? We’ll view each scenario through four lenses:

1. Trade (represented by the USMCA review process in 2026)

2. Migrants

3. Fentanyl and other drugs.

4. China (exports to the US)

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A. Best Case:? China Replacement.??? AKA:? The Texas AmCham Makeover

Mexico emerges as the trusted ally, the familiar neighbor, the loyal teammate working arm in arm with the US to oppose the evils of Chinese economic aggression and the deadly epidemic of poisonous narcotics.? Sheinbaum gets a Texas AmCham makeover and ends up a champion of big deals and closed borders.? In this scenario, Mexico is an enthusiastic, proactive partner with Trump -- keeping the Chinese at bay, the Cartels quaking in their boots, the border closed, and the labor unions quiet.???

Last week's announcement of restrictive tariffs on steel imports originating in China and passing through Mexico on the way to the US was just the beginning.? In this nearshore-friendly scenario, Mexico and the US will work together collaboratively to solve the whole gamut of problems facing the North American Trade Bloc – but there is a catch or three.?

Caveat#1:? The Trump administration is the one defining the problems (open border, fentanyl, Chinese dumping), and Mexico will be expected to take its cues from the US.? This will be a “loyal junior partner” role.? The Sheinbaum admin will have a degree of latitude as to HOW it implements solutions, but not much about WHAT the problems are.? I.e.:? The US will view open borders and fentanyl as top priorities – high levels of carbon emissions, less so.

Caveat #2:? It only works as a preemptive strategy.? Many in the MAGA camp presently see Mexico as the source of all that is evil in the US – immigration, drugs, lack of good jobs, unfair Chinese competition, and a weakened America.? The Sheinbaum people have a narrow window to build high-level business relations among the right-wing donor class who already have business interests that straddle the border. ?If she doesn’t strike first, however, the nativists will seize the initiative.? There is no coming back from that.? ??

Caveat #3:? A core group of self-interested Good Ol’ Boys will be great proxies for Maquiladora Mexico on trade – especially when they are discussing importing parts from GM’s San Luis Potosi factory that are bound for GM’s Fort Wayne factory.? As for the border, drugs, and Chinese production – these issues are more likely to be decided in Washington DC (at the Heritage Foundation).??

The scorecard for Mexico under this scenario:

USMCA review.? Relatively smooth.? The existing benefits of the USMCA tariff & customs regime will stay largely intact.? There will be new language restricting Chinese investment and exports to the US, but the trade relationship that you care about will survive.

Migrants.? The US side of the border will certainly be militarized in some way, shape, and degree.? The Wall will be resurrected as a symbolic structure. ?Mexican refugee camps in Chiapas, Tamaulipas, and Baja will be more functional.??

Fentanyl/Narcotics.? MAGA pundits have long discussed the necessity for US troops – and almost certainly drones – on Mexican sovereign ground.?? This is a bitter pill to swallow, but if the Sheinbaum people know what they’re doing they will frame this as their own idea – and attempt to exert as much control as possible.?

China.? As with fentanyl, the Sheinbaum admin’s position will be to grudgingly allow the US to force it to do what it needed to do anyway.? Chinese production methods and state support will harm US brands – but gut Mexican manufacturers.?

Does this seem like a capitulation of Mexican independence to the baser instincts of MAGA populism?? Sure does.? Won’t this make Mexico more or less a junior partner in the North American economy?? Seems like it.?? Will it work?? Possibly – but the pitch for a high-level partnership sounds better with a Texas accent.?

What this means to you:? I don’t think this scenario is likely, but an integrated partnership that encompasses a wide range of issues can be viewed as the “best of all possible worlds” for nearshorers. ??The more Mexico is viewed as a bulwark against China, the better our business will be.?

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B. Most Likely Case:? The Ugly American Neighbor.?? AKA Compartmentalization.

In this scenario, relations are not great, but nearshoring to Mexico remains a viable business strategy.? Sheinbaum and the Morena party maintain their virtue and “keep it real” by fighting the MAGANs in a heroic rearguard action.? US troops are still on the border and Chinese output clogs the customs queue from Otay Mesa to Reynosa. ?

Sheinbaum will eventually adjust to the new Trump reality, (China Bad, Cartels Dangerous, Migrants are a Mexico Problem), but it will be too late to stave off unilateral actions from the North.

USMCA Review – It will be rough, but the trade regime will survive in a fairly recognizable form.? Look for language that will keep the Chinese out and raise the regional content requirement.? New tariffs on compliant output are unlikely – but it will be harder to qualify for USMCA preferential treatment.

Migrants.? The border will be militarized and closed.? Mexico will have to deal with both the denied asylum seekers AND waves of deportees (whether they are Mexican or not).? The US deportation process will be brutal, ad-hoc, unpredictable, and onerous for Mexico.?

Fentanyl/Drugs – Along with the closed border, this is a red line for the US. MAGA influencers don’t really differentiate between Cartels and the Mexican government, so we can expect unilateral, direct action.? Very direct.? (We’re talking about drone strikes and assassinations.)?

China – The US will use the entities list and national security carve-outs but will also pressure Mexico to restrict Chinese FDI by instituting some kind of CFIUS program.

What this means to you:? You’re the Ugly American / Ugly Gringo - again.?? It won’t be all that different on the Mexican side, but the border crossings for freight and customs inspections will be slower and unpredictable.? Mexico will be slightly more dangerous for foreigners to visit.? Mexicans are sophisticated about the US, and they know that you are not your government.? On the other hand, the problems that MAGA flings around Mexico will find their way down to you and your business.? ????Still, trade will carry on much as before.

C. Worst case.? The "Bad Hombre" Conundrum.? ?AKA:? No more USMCA

In this worst-case scenario, Mexico is branded an enemy and the primary source of all that is wrong in the US.? The Sheinbaum team starts 2025 defending their existing progressive agenda and is immediately confronted by angry US nativists. ?MAGA demonizes Mexico as the puppet master behind hordes of “bad hombre” illegals, a tidal wave of fentanyl (or worse), and every problem threatening the US economy.??? Trump complains loudly and often about “that nasty Sheinberg woman” and blames her for the unraveling of the USMCA – which he never liked anyway.

USMCA Review - In this scenario, the USMCA has a short future.? It may get tossed out before 2026, at the July 2026 review, or sometime after.? But it will get abrogated.

Migrants - The border will be militarized, and illegal crossers will be deported or worse.? There will be a wall, an aggressive border guard, and a full-on effort to stop the smuggling of drugs, people, and Chinese production.?

Fentanyl/Drugs - Cartels will be classified as international terrorist organizations.? Suspected members and associates will be considered fair-game targets on both sides of the border.?

What this means to you:? This is a bleak scenario – but it doesn’t disqualify Mexico as a production center.? Even if the USMCA is abrogated and a 10% tariff is levied on all non-Chinese foreign production, Mexico will still be more attractive than any other low-cost outsourcing destination.?

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Final Word:? The trade relationship between the US and Mexico is an environmental factor. ?It’s completely beyond your control, but you have to monitor it and take appropriate action.? You can’t make MAGA suddenly fall in love with Mexico – but you do know what the red flags are and where the bottlenecks will be.? Make sure your supply chain has little to no China in it – and have a logistics Plan B if you are heavily committed to a specific overland crossing.? ?

Next:? 5 Steps Nearshorers need to take NOW to prepare for a Trump presidency.

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