As the 2026 review of the United States-Mexico-Canada Agreement (USMCA) approaches, increasing Chinese investment and manufacturing activity in Mexico is reshaping North American supply chains — and raising new questions about trade compliance, tariffs and the future of cross-border freight.
Jorge Gonzalez Henrichsen, co-CEO of The Nearshore Co., said the narrative that China is using Mexico as a “backdoor” into the U.S. market is both accurate and oversimplified.
“The answer to the question is yes and no… things are for real, and you see it in the numbers… but the word ‘backdoor’ has a negative connotation,” Henrichsen told FreightWaves.
Chinese companies have significantly expanded their presence in Mexico in recent years, particularly since the COVID-19 pandemic disrupted global supply chains. Henrichsen said the shift has been driven in large part by U.S. companies seeking to reduce tariff exposure and geopolitical risk tied to China.
“There has been a spike, probably since COVID, both in manufacturing facilities… and EVs is a big, big, big… something that’s notorious,” he said.
From tariffs to nearshoring — and adaptation
Rather than exiting the U.S. market, many Chinese suppliers have adapted by relocating production to Mexico, setting up local entities and hiring Mexican labor to qualify for preferential trade treatment under USMCA.
Henrichsen described one common scenario: U.S. buyers cutting ties with China-based suppliers, only to see those same suppliers reemerge in Mexico.
“The Chinese company would say… ‘I’ll go to Mexico. I’ll become a Mexican company,’” he said.
While some critics argue that minimal processing or relabeling could be used to circumvent tariffs, Henrichsen said most activity falls into a legal gray area — or is fully compliant — as companies work to meet rules-of-origin thresholds.
China expands investments in Mexico
Chinese foreign direct investment (FDI) in Mexico has accelerated significantly since 2017, particularly following the U.S.-China trade war and the implementation of the USMCA in 2020, which helped drive a new wave of manufacturing-focused investment, according to the Federal Reserve Bank of Dallas.
Official data show Mexico received about $2.3 billion in net Chinese FDI from 2017 to 2024, though private estimates suggest the true figure could be several times higher, reflecting investments routed through offshore entities and greenfield projects.
One of the largest single investments was a $5 billion factory from the China-based Lingong Machinery Group that was announced in October 2023 in the Mexican city of Monterrey.
Despite rapid growth, Chinese investment still lags far behind U.S. and other G7 countries, accounting for only a small share of total FDI into Mexico even as Chinese firms play an increasingly visible role in nearshoring supply chains.
Economic upside — and growing tension
The influx of Chinese firms has fueled industrial growth across northern Mexico, boosting employment, manufacturing capacity and supplier development.
“I think that type of arrangement is very positive for Mexico… they are bringing… know-how in manufacturing… and that is very positive for the ecosystem,” Henrichsen said.
Still, the trend is creating friction. Mexican companies face new competition, while policymakers in both Mexico and the U.S. are under pressure to address concerns about Chinese overcapacity and supply chain dependence.
Recent discussions between U.S. Trade Representative Jamieson Greer and Mexican officials have focused on tightening rules of origin, strengthening economic security measures and aligning tariff policies ahead of the USMCA review.
At the same time, U.S. officials have signaled that tariffs — particularly on autos and steel — are likely to remain in place even after renegotiation.
USMCA review: Tweaks, not overhaul
Henrichsen expects the agreement to survive the 2026 review but with meaningful adjustments, particularly around rules of origin and enforcement.
“My forecast is that the USMCA will continue to exist… but it will be tweaked… both to appease some of the U.S. forces… and also to see genuine improvements,” he said.
Rules of origin are likely to be a central battleground, as U.S. policymakers look to limit Chinese content in North American goods while preserving integrated regional supply chains.
Analysts say changes could include stricter content thresholds, enhanced enforcement mechanisms and greater coordination on tariffs and investment screening targeting China-linked activity.
Investment slows amid uncertainty
Despite strong interest in nearshoring, companies are taking a wait-and-see approach as negotiations unfold, delaying major capital commitments.
“A lot of the companies… are saying, ‘you know what, let’s wait a couple of months’… the suspense around the USMCA is making them wait,” Henrichsen said.
Still, he emphasized that for many manufacturers — particularly those serving the U.S. market — the long-term case for Mexico remains intact regardless of policy changes.
“For some companies… don’t wait… there’s nothing that’s going to happen that’s going to change the structure… just move fast and nearshore,” he said.
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