By Judith Álvarez
All is well. No need to worry. Nothing to see here.
That’s the message sent by Mexico’s still-new President Claudia Sheinbaum in response to the recent re-election of Donald Trump to the White House. The future reality is likely far less rosy.
U.S. industries with heavy investment in trade over the United States’ southern border with Mexico are already anticipating an uphill battle for their supply chains in the months after the president-elect takes office. Trump has been outwardly transparent about his views on Mexico. From immigration to cartels to trade relations, he has made it clear that he intends to take Mexico to task and make unilateral decisions when need be to achieve his goals of keeping U.S. border secure from migrants, drug traffickers and Chinese imports.
Investment Boom
Many businesses on both sides of the border are anticipating a return to the disruptive days of 2018, only on a larger scale. Over the past four years, Mexico has enjoyed a mass influx of foreign investment, much of which is coming from the U.S. Cross-border truck visits across the Laredo border crossing (the largest on the U.S. southern border) have spiked more than 50% year-over-year for the first three quarters of 2025. U.S. exports to Mexico have grown from $212 billion in 2019 to $322 billion in 2023 and are on track to well exceed those figures in 2024. In 2023, total stock of foreign investment in Mexico stood at $649 billion and net new inflows for the year stood at $35.3 billion, a 12% increase over the previous year. Investments from the U.S. made up 37.8% of that – the lion’s share by far.
The Tariff Threat
For all those reasons, the stated objectives of the Trump campaign are cause for more than just the standard new-kid-in-town concerns that come with a change in government. There’s much at stake. Trump has stated repeatedly and unequivocally his intent to implement a universal tariff of either 10% or 20% and to impose a 200% tariff on all automobiles entering the U.S. from Mexico. In addition, he has floated the idea of a 25% tariff on all Mexican imports if the Mexican government doesn’t curb the number of migrants arriving at U.S. borders, and taking action to reduce/eliminate the flow of drugs. The automobile policy is aimed squarely at stemming the rising tide of Chinese electric vehicle makers interested in manufacturing in Mexico. It’s little secret that Chinese companies are circumventing the tariffs Trump put in place against Chinese imports during his first term in office by relocating or establishing new production facilities in Mexico where they can take advantage of free cross-border trade. Cargo volumes from China to Mexico’s west-coast ports rose from 78,000 containers when Trump left office to a high of 135,000 by the midpoint of 2024.
It isn’t just the tariffs targeted at Mexico’s imports that are threatening, but those targeted at China, as well. A 60% tariff on all Chinese imports into the U.S. means American companies operating in Mexico but using components imported into Mexico from China could be at risk of being shut out of free trade.
Holding the government to account
Given the volume of investment from the U.S. and the reliance on the U.S. as a principal trading partner, there is good reason for Mexico’s government – and investors in Mexico’s economy – to be concerned about a second Trump term. The Biden administration had approached relations with Mexico using kid gloves. The U.S. Trade Representative’s (USTR) Katherine Tai had called out Mexico for a number of transgressions, but no concrete action was taken. Conversely, Trump forced Mexico to incorporate labor reforms into the United States-Mexico-Canada Agreement (USMCA) to level the playing field between American and Mexican workers. There’s good reason to believe he and his own USTR will hold Mexico to account for those policies, as well as the energy-sector reforms it was expected to enact as part of the USMCA.
A New View on Regional Value Content
Trade observers fear that a new USTR under Trump could push for a new definition of regional value content under the USMCA. Regional Value Content is the calculation of what percentage of an import is made up of content from within the USMCA’s trading zone. Today, components from China can be incorporated into an automobile or part of an automobile made in Mexico and – provided the transformation is substantial – can be considered entirely from Mexico.
Given the pervasiveness of Chinese manufacturing in Mexico in recent years, a new Trump administration could change the rules for regional value content when the USMCA is reviewed in 2026 to prohibit the use of Chinese components (or apply the 60% tariff on those components). This would be particularly damaging to the automotive sector, which has already had to adapt to a spike in regional value content requirements (from 62.5% to 75%) in 2020 when the USMCA went into effect. Equally as threatening is the associated administration burden. A USMCA panel has already ruled in Mexico’s and Canada’s favor that the so-called “roll-up” method of calculating regional value content is acceptable (much to Washington’s chagrin). The Trump administration could re-open that old wound by insisting on precise content calculation or scrapping the deal entirely in 2026).
Compliance: Mission Critical
In 2025 and beyond, U.S. companies with operations in Mexico will need to have a sharper lens on compliance. For larger companies that move goods in bulk across the U.S. southern border and have robust and sophisticated systems to manage their trade, this is less of a concern. Global trade management solutions have long helped these companies track movements, assign values to goods, correctly classify them and calculate the requisite duty outlay in an automated fashion.
But for many of those companies who have more recently set up shop in Mexico, manual processes remain at the heart of their trade activity. That leaves room not only for human error, but for an inability to identify changes in regulatory requirements or classification codes, leading to the risk of non-compliance. Given U.S. Customs and Border Protection’s (CBP’s) heightened scrutiny on customs compliance in recent years, the risk of being flagged for non-compliance is greater than ever. A customs audit – apart from being a massive administrative undertaking that will pull resources away from other tasks – can result in financial penalties and retroactive duties.
Origin Verification
Another more recent audit trend emerging from U.S. Customs is a higher degree of attention on origin verification, particularly for imports being claimed under the USMCA. Washington has caught onto the trends that Chinese products (namely product components) are making their way into the U.S. duty free via transhipment within the USMCA territories (as noted above).
In response, CBP has been issuing an increasing number of origin-verification requests to importers in all industries, but particularly to those in the automotive industry. The outcome has been a flurry of administrative activity amongst importers to validate that the goods being imported comply with USMCA rules and meet the regional content requirements. That might not sound like an onerous task, but when one considers that each request comes with a 30-day deadline and requires the importer to produce a bill of material for the imported goods that clearly shows which components are eligible for duty exemption under the USMCA rules and which are not, while also correctly classifying and accurately valuing each one of those components and producing documentation to certify goods that are from within the USMCA region. Failing to do so could change the regional value content calculation and make the imports ineligible for duty exemption under the USMCA. Businesses that import into the U.S. in bulk could be looking at multiple origin-verification requests at a time, which is particularly gruelling administrative work, especially since some of the documentation may have to come from suppliers who are not easily accessible. To make things even more challenging, it’s not just U.S. customs authorities who are doubling down on origin verification, Mexican customs authorities are doing the same. For businesses engaged in frequent cross-border trade, that can be exponentially painful.
Looking Ahead
U.S. enterprises actively trading goods across the country’s southern border will need to watch trade policy closely in 2025 and should be considering today alternative production and sourcing options. That may feel frustrating given that many have recently uprooted production in China to transplant it to Mexico and may now need to do the same. But hoping for the best without a contingency plan could leave businesses exposed to sudden – and very costly – disruption to their supply chains.
Strategic businesses should be carefully evaluating not just their suppliers but their suppliers’ suppliers, identifying opportunities for redundancy outside of Mexico (countries in Central America have become strong alternatives to Mexico in certain instances), and evaluating automated systems or professional Global Trade Management firms to manage their trade activity to prevent costly compliance gaps. There is an understandable degree of angst given the president-elect’s propensity to make use of presidential powers to impose tariffs and often on short notice, but knowing where a supply chain may be vulnerable and taking steps to protect it can help to offset some of the inevitable disruption.
Judith Álvarez has broad experience in import management and export operations in Mexico. She holds extensive knowledge of IMMEX regulations, certifications, origin determinations of various free trade agreements, duty-minimization analysis and HTS classification. In her daily work, she manages foreign trade consulting services for key clients and is responsible for analysis of new regulations applicable to import/export operations in Mexico, the U.S. and Latin America.