Washington – President Donald Trump’s 25% tariff on imports from Mexico and Canada, set to take effect on Tuesday, will have a ripple effect not only on these two countries but also on Chinese companies. The Hofusan Industrial Park, located just 20 km north of Monterrey, Mexico and a 2.5-hour drive from Laredo, Texas, is a prime example of how Chinese businesses will be impacted by these tariffs.
The industrial park, which caters specifically to Chinese companies, markets itself as an “ideal logistics hub for the North American market” on its website. It also boasts of being an “alternative” for Chinese products to enter the American market and lists “avoiding trade barriers” as one of the reasons for Chinese investment in the park.
During a Thursday news conference, President Trump cited drugs coming into the US through Mexico and China as the reasons for imposing tariffs on these countries. However, according to Evan Ellis, a research professor of Latin American studies and a China expert, the tariffs are not solely aimed at drugs. He believes that the Trump administration is also sending a message to Chinese companies that they cannot use Mexico as a pass-through to access the US market without facing tariffs.
Christopher Tang, a business and supply chain professor at the University of California-Los Angeles, believes that these tariffs will have a significant impact on Chinese businesses operating within the Hofusan Industrial Park. He explains that the tariffs will erode their competitive advantage and profit margins, effectively closing the US market for them unless they find alternative strategies to mitigate the impact.
When contacted by VOA, Chinese companies in the industrial park declined to comment on the issue. However, Tang predicts that these companies will either focus on other Latin American markets if they stay in Mexico or move their operations to the US or Asia to avoid the high tariffs.
Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, also believes that Chinese companies located in Canada or Mexico will become targets of the US. He suggests that Chinese companies should start looking for other locations to invest in, such as Australia, Japan, Nordic countries, the United Kingdom, and Brazil.
Mexico has been a cost-effective alternative for Chinese companies looking to enter the US market due to tariffs imposed during the Trump administration and higher transportation costs in recent years. This led to the establishment of the Hofusan Industrial Park in 2017, which was tailor-made for Chinese enterprises. The park has attracted about 40 companies, including Lingong Heavy Machinery, BYD, Hisense, Trina Solar, and Man Wah Furniture.
The United States-Mexico-Canada Agreement (USMCA), which went into effect in July 2020, allows Mexican-made products that meet certain rules of origin to enter the US market tariff-free. However, with the agreement up for renewal in July 2026, there is uncertainty about the future of Chinese investment in Mexico. If the agreement is not renewed or if there are further tariffs imposed on Mexican imports, Chinese investment in Mexico may decline significantly.
Xeneta, a company that analyzes air and ocean freight markets, reported last year that China’s trade with Mexico was the fastest-growing trade route in the world. Chinese foreign direct investment (FDI) in Mexico has also increased significantly in the past five years, with the automotive industry being a major driver. However, in recent years, the automotive industry has become the main driver of Chinese investment in Mexico, accounting for about three-quarters of China’s total investment in 2023.
There are concerns in the US that Chinese companies are using the USMCA as a backdoor to continue importing goods into the country. Nick Vyas, a global supply chain expert at the University of Southern California’s Marshall School of Business, believes that this has become a pressing issue in bilateral trade negotiations between the US and Mexico. He questions whether products labeled “Made in Mexico” are truly made in Mexico or just assembled there.
Traceability and trade compliance have become major concerns for the US, and Vyas suggests that Mexican President Claudia Sheinbaum may be willing to sacrifice the interests of Chinese companies if necessary. However, Ellis predicts that if the Chinese government responds with tariffs of its own, it will only escalate the trade war and further damage the Chinese economy and its companies.
But it’s not just the Chinese companies who will be affected by these tariffs. Tang warns that the cost of goods will go up for US businesses and consumers, and there may
