TPM 25: Tariffs Could Cause ‘Short-Term Disruption’ But Won’t Upend US-Mexico Trade
Kate Nishimura
5 min read
It may take more than a tariff scare to upend an increasingly interconnected and rapidly maturing U.S.-Mexico supply chain for consumer goods.
“Where there’s a will, there’s a way,” seemed to be the message conveyed by trade and logistics experts at the TPM25 trade and logistics conference hosted in Long Beach, Calif. by S&P Global this week.
“This is by far the biggest thing that that could potentially happen between U.S., Mexico and Canada this year,” said Mike Burkhart, vice president of North American surface transportation at 3PL C.H. Robinson.
The magnitude of President Donald Trump’s 25-percent duties on North American trade partners, levied on Tuesday, is not to be understated. “However, if you think historically about it, the last five years, there has been hundreds of billions of dollars that have gone into Mexico specifically to build manufacturing facilities,” Burkhart said.
The expanding network of Tier 1 and Tier 2 suppliers surrounding these final assemblers has created some essential verticalization in the Mexican supply chain for a number of products, and it’s getting to a place where “that efficiency can’t be duplicated elsewhere” in the Western Hemisphere, he believes.
“Even though [tariffs] could create short-term disruption—and short-term learnings that we will all adjust to as we adjust to all disruption in the marketplace—long term, I think Mexico is still going to be a heavy producer of products in the for the United States and Canada,” Burkhart added.
Demetri Venetis, president of freight forwarding at RXO, agreed, saying, “There are certain supply chains that are so entrenched in Mexico when it comes to automotive and industrial electronics, that these long term capital expenditure decisions aren’t taken lightly, and they take time before any actions can be made.”
In short, “it’s really too early to tell” what the implications of double-digit duties will be on companies’ long-term sourcing strategies, he believes.
From left: moderator William Cassidy, Mike Burkhart, Jay Jerard, Demetri Venetis, Jimena Villarreal.
“The relationships are so intertwined, where you’re seeing raw materials go in, finished goods come back out, back and forth and back and forth” between Mexico and the U.S., added Jay Gerard, head of Customs at Nuvocargo. “Everyone is so dependent on each other; it’s years of these relationships being built. It’s going to be hard to take away with just the tariffs.”
However, Gerard acknowledged that the back-and-forth nature of the U.S.-Mexico supply chain may see hiccups due to certain provisions of Trump’s directive. “In the executive order, there was a specific claim for no drawback, which means if you do import it and then export it back out, you’re not entitled to reclaim that duty back. So that’s a big deal for people that are moving freight in and out of the country,” he said.
Even if a product is exported, re-exported or destroyed, the tariffs won’t be refunded or remitted—a big downside for suppliers and manufacturers working together across the Southern border.
But even amid all the tariff tumult, which began with Trump’s threats against Mexico last fall, foreign direct investment (FDI) in the country has accelerated, and it’s largely driven by U.S. firms.
According to preliminary data released by Mexico’s Economy Ministry last week, FDI reached about $37 billion in 2024 (the largest preliminary number on record), and 45 percent ($16.5 billion) of that cash infusion came from the U.S., followed by Japan ($4.2 billion), Germany ($3.78 billion) and Canada ($3.2 billion). The vast majority of that investment (80 percent) was a continued funneling of funding from companies already active in the country.
“This is huge, because a lot of the effort that’s already been made is being made larger,” said panelist Jimena Villarreal, Mexico expansion manager at Nepanoa, an advisory firm that helps corporations develop supply chains in Latin America. “It’s adding more lines of production… And obviously the manufacturing hub in the northern part of Mexico is huge for that FDI.”
Much of the investment is currently being directed toward the “Golden Triangle” between Monterrey, Guadalajara and Mexico City.
While U.S. companies are bought into Mexico expansion, panelists acknowledged that the country’s ties to China may prove a sore point in the upcoming renegotiation of USMCA, which will take place in July 2026.
“There’s no doubt about it. The administration has already spoken about it. I think China’s the largest investor in industrial parks; their FDI has doubled over the last couple years so there’s a lot of talk about it being the back door when it comes to tariffs,” said RXO’s Venetis. That could lead to increased scrutiny regarding country of origin for Mexican exports, he added.
“And in addition to that, ownership of these companies… that’s a focus that they’re going to talk about in 2026,” said Gerard. As more companies seek to transition their supply chains closer to home, China-based manufacturing groups are expanding their operations into burgeoning sourcing regions like Latin America and Africa.
U.S. duties on Mexican-made goods may have unintended and unwelcome consequences for the current administration, Villarreal believes. While the federal government has been trying to limit China’s influence and “make sure it stays in its lane,” it should be reminded that China is an important trade partner to all three North American markets and its influence may be bolstered by the current trade scuffle, she said.
“The decision has effects across all these nations, and North America has to start acting like a trade bloc, more than anything,” she added.
