Saturday | January 18, 2025
The expansive industrial complex stretches across the countryside, lined with rows of sprawling manufacturing facilities resembling giant warehouses. Splashes of red and gold—symbols of good fortune in Chinese culture—adorn the otherwise muted gray structures, while the scent of Peking duck wafts from an on-site canteen.
However, this bustling hub isn’t located in Beijing or Shanghai but thousands of miles away in northern Mexico, just a few hours’ drive from the Texas border.
Here, street signs display both Chinese and Spanish, and the flags of the People’s Republic of China and Mexico flutter side by side. This is one of several “industrial Chinatowns” that have emerged in the Monterrey region, transforming agricultural fields into factories and driving both local and national economic growth.
This surge is largely driven by “nearshoring,” a trend in which Chinese companies relocate production to Mexico to benefit from tariff-free access to the U.S. market under the USMCA trade agreement. This deal, originally negotiated by President Donald Trump during his first term, is now under scrutiny as Trump’s imminent second term looms, along with his threats of new tariffs on Mexico and other nations, as well as the establishment of an “External Revenue Service” to enforce trade payments.
Matt Harrison, president of Kuka Home North America, which operates a furniture manufacturing plant in Monterrey, expressed deep concerns about the potential impact.
“A 25% tariff on Mexican goods would force me out of business,” Harrison explained. “We’re in a wait-and-see situation as Trump takes office, uncertain whether we can continue to grow.”
Despite these uncertainties, César Santos, who has leased land for Chinese investment, remains optimistic.
“Even with a 25% tariff, many businesses consider Mexico a more viable option than manufacturing in China,” Santos told CNN.
From horses to housewares
Santos recalls the days of riding horses to his family home, a ranch that had been in his family for generations. The old farmhouse still stands as a reminder of the past, though it is now surrounded by construction projects—factories, housing developments, and even a hotel.
In 2013, Santos and his family began transforming their 1,500-acre property, collaborating with Chinese investors eager to establish manufacturing operations closer to their U.S. customers. The dynamic shifted dramatically in 2018 when former President Donald Trump introduced tariffs on Chinese goods entering the United States—a policy largely maintained and expanded by President Joe Biden.
“That actually worked to our advantage. When tariffs were imposed on China, those companies turned to us,” Santos explained. Initially, firms entered into temporary leases but soon transitioned to purchasing entire facilities as they recognized additional benefits.
“From here, we’re only 160 miles from Texas,” Santos noted. “In just 24 to 44 hours, products can reach the U.S. market. This logistical efficiency is a major advantage for them.”
In 2015, Santos partnered with two Chinese firms to develop Hofusan, an industrial park that has since attracted agreements with 40 Chinese companies. These factories, either operational or nearing completion, manufacture a wide range of products, including electronics, furniture, and automotive parts, all destined for the U.S. market.
Chinese investment in Mexico has surged, growing from $5.5 million in 2013 to $570 million in 2022. In the first half of 2024 alone—the most recent period with available data—China directed $235 million in foreign direct investment to Mexico, according to official statistics.
Despite potential challenges, such as President-elect Trump’s threats to impose tariffs on Mexican goods as a response to perceived shortcomings in halting undocumented migration, Santos remains optimistic about the prospects for businesses starting production in Mexico.
To safeguard his investments and address security concerns, Santos has donated land adjacent to his industrial development for Fuerza Civil, the state police, to establish a station.
Santos, who admires Trump’s leadership qualities, expressed support for the incoming U.S. president.
“With all the challenges we face—criminal gangs, drugs—we need strong leaders like him to help address these issues,” he said.
Combining cultures
Both Mexicans and Chinese are building new partnerships as they strive to sustain the economic boom.
Developer Ramiro González, who goes by the nickname “Da Long” or “Big Dragon” in Chinese, proudly wears the name stitched in Chinese characters on his vest.
“Chinese culture values efficiency and speed. They expect things to move quickly, so here in Mexico, we’re working to streamline our construction and design processes to meet those expectations,” González explained.
Surrounded by the beeping of earthmovers and construction equipment, he showcased plans for his newest project—another industrial park, this time situated outside Monterrey, where development has already reached a saturation point.
Cultural differences do arise, especially for Chinese workers adapting to life in Mexico. Zhang Jianqiu, an engineer specializing in robotics equipment for new factories, admitted feeling homesick living so far from his family. He and his housemates went to great lengths to find the right electric kettles to make their traditional Chinese tea, brought by every returning traveler from China.
However, Zhang found greater comfort once he began exploring Mexican culture, trying local cuisine, and learning Spanish. Known as “Lupe” among his Mexican friends, he now plays a pivotal role in connecting Chinese companies with the local communities hosting them.
Reflecting on the potential impact of tariffs, Zhang noted, “Many Chinese companies are still in a wait-and-see mode, deciding their next steps cautiously.”
Challenges like tariffs are familiar territory for Chinese businesses, he added.
“To go global, Chinese companies must navigate not only tariffs but also local policies and regulations,” Zhang said. “But business is business, and politics is politics.”
Despite looming tariff threats, Zhang and many Mexican workers share a belief that Donald Trump, as a seasoned businessman, would prioritize financial pragmatism and avoid decisions that might harm the American economy.
Economists and CEOs argue that U.S. consumers ultimately bear the cost of tariffs, as companies pass on these expenses through higher prices. While tariffs can theoretically boost domestic manufacturing by making it more competitive, other factors such as consumer demand and interest rates may counteract these benefits.
“For any businessman, profits are paramount,” Zhang said of Trump’s approach. “Pre-election rhetoric is one thing, but once in office, decisions often shift to what makes economic sense.”
China responded to Trump’s initial tariffs during his first term with countermeasures of its own but has not been directly involved in individual businesses relocating operations to Mexico.
In November 2024, Chinese Foreign Ministry spokesperson Mao Ning reaffirmed the strong ties between China and Mexico, calling them “good friends” and “good partners.” She emphasized, “We believe politicizing economic issues benefits no one.”
Mexican workers and Chinese bosses
On the factory floors, where sofa frames are assembled and cushion covers are stitched, Chinese and Mexican traditions blend seamlessly. While the workforce consists predominantly of Mexican laborers and managers, the senior leadership is primarily Chinese, with a ratio of approximately 95% local workers to 5% Chinese staff, according to a representative from Kuka Home.
Mexican employees highlight how their strong work ethic aligns well with the expectations of their Chinese supervisors, who oversee training and emphasize adherence to local labor regulations. The Chinese managers appear satisfied, ensuring compliance with these rules.
At the Kuka Home factory, located closer to downtown Monterrey than the Hofusan industrial park, assembly lines are a hive of activity.
Christian Cordero, a supervisor, spoke with pride about their furniture production, much of which is destined for luxury retailers like Crate & Barrel and Williams Sonoma. “Around 90-95% of what we produce here is exported. That’s why we are so committed to quality. Our priority is instilling a culture of excellence among our workers and then maintaining it through audits as leaders and supervisors,” he explained.
Eric Espinoza, a new employee with just three months on the job, acknowledged the significant draw of Monterrey’s industrial Chinatowns. “This has been a great opportunity. We currently employ more than 1,100 people,” he said.
Espinoza expressed concern over the potential consequences of U.S. tariffs, which could drive up the cost of their products for American consumers. He also emphasized the broader impact on local families.
“If these jobs disappear, many families will suffer. For some, crossing the border to find work might become the only option,” he noted.
The effects of tariff threats are already evident. Matt Harrison of Kuka Home North America has suspended construction on a neighboring facility that was planned to meet growing U.S. demand. He cited the uncertainty around tariffs as the reason for the halt and revealed that he is now exploring expansion opportunities in Vietnam, supported by his Chinese partners.
Although Vietnamese exports to the U.S. are also subject to tariffs, the relatively low manufacturing costs in Vietnam make it a competitive alternative.
“No company can absorb a 25% tariff,” Harrison said. “Ultimately, it’s the American consumer who bears the cost, and that’s essentially immediate inflation.”
Caught in the middle
Horacio Carreón, an assistant professor of international business and logistics at Tecnológico de Monterrey, is analyzing the potential ripple effects that could arise from new U.S. tariffs.
Currently, he observes contrasting strategies between the unconventional approach of President-elect Trump and the more academic, measured style of Mexico’s President Claudia Sheinbaum in addressing geopolitical challenges. However, Carreón suspects the issue may ultimately boil down to a power struggle between the U.S. and China, with Mexico caught in the middle.
“It’s like a love triangle straight out of a Mexican telenovela, and we’re stuck in the middle,” Carreón remarked. He pointed out that while Mexico has successfully partnered with both the U.S. and China as their economies expanded, it now faces a critical juncture.
“Mexico is in a very complicated position right now. The question is: where do we go from here? Do we stay with our long-standing partner, the U.S., or do we explore new opportunities elsewhere?” he said.
Mexico has seen unprecedented growth in industrial and commercial construction in recent years, according to data from the Secretary of the Economy. In 2023, Mexico even surpassed China as the top exporter to the U.S.
Ramiro González, whose construction company has been overwhelmed with interest from Chinese firms seeking to expand in Mexico, sees continued potential for growth. “We’ve created spaces for thousands of jobs, and the opportunities ahead are immense,” he said. “It’s just a matter of adapting to how the landscape evolves.”
Similarly, César Santos, who transformed his family’s ranch into a thriving industrial park, remains prepared for further changes if necessary.
“If the U.S. market becomes too difficult, we’ll pivot toward Latin America and other global opportunities,” Santos said.