Could Mexico be the winner in the US – China trade war?

Mexico's allure seems to come from the ongoing U.S. - China trade war. Additionally, many companies are forced to reevaluate their global supply chains in this ongoing global pandemic, sources with direct knowledge of the matter told Reuters reports. Two large-scale manufacturers who reportedly eye Mexico as a potential location for an expansion are Foxconn and Pegatron. It was not immediately clear which clients the companies would work with in Mexico. However, sources hat spoke with Reuters claimed that Foxconn has plans to use the factory to make iPhones, despite any clear sign of a direct involvement by Apple. If this reported plan will come into fruition, Foxconn is likely to make a final decision of the new factory later this year, and construction would then soon follow, the sources continued while stressing that the is no certainty that the company would stick to the plan. Apple declined to comment on Reuters’ questions. Pegatron reportedly is in early discussions for an additional facility in Mexico – which would mainly be used to assemble chips and other components, the report continues. Foxconn’s current setup in Mexico consists of five manufacturing factories focussing mainly on the production of TV’s and servers. A potential expansion would continue a gradual shift of global supply chains away from China, especially visible during the trade war and the current pandemic. At the same time, the term “near-shoring” is gaining momentum in Washington. As reported by Reuters, the Trump administration is currently exploring financial incentives to encourage firms to move production facilities from Asia to the United States or even Latin America and the Caribbean. Why Mexico though? Besides having geography, low wages and times zones in its favour – there is also the new United States–Mexico–Canada Agreement (which replaces NAFTA) with the world’s biggest consumer market. Government data shared by Office for Economic Affairs shows that foreign investment held stable during the first half of 2020, despite the ongoing pandemic and an uncertain economic environment. A third source told Reuters that Foxconn had indeed contacted the Mexican government, adding that the talks were in early stages and that the Covid-19 pandemic in the country was a major concern for the possible investment. Foxconn however told Reuters that, while the company continues to expand global operations and is an “active investor” in the country, it had no current plans to increase those investments. The Taipei Economic and Cultural Office in Mexico, representing the Taiwanese government in the country, confirmed to Reuters that it had heard Foxconn was interested in building another factory in Ciudad Juarez. The office’s Director General Armando Cheng also confirmed he had heard of Pegatron wanting to move a production line from China to Mexico. However, he did not have any details on either company’s plans. An update from The Taipei Economic and Cultural Office in Mexico, posted on August 28, states that a memorandum of understanding has been signed between the Taiwanese Electrical and Electronic Industry Association and The Confederation of Industrial Chambers of the United Mexican States, CONCAMIN, under which the two associations will jointly work to promote trade and investment activities between Taiwan and Mexico as well as further the development of Mexico's movement towards Industry 4.0.