Outsourcing in Mexico vs China: Which Is Better for U.S. Manufacturers Today?

Published On: November 15, 2021

When weighing your options for outsourcing in Mexico vs China, it’s crucial to consider the trade war between China and the United States, from which Mexico is emerging as the possible winner.

This trade war continues today, and tensions have not improved in the face of the COVID-19 pandemic. As a result, companies are rethinking their approach to forming and managing their supply chains to save costs while minimizing risks, and many have turned to Mexico for answers that they could not find in China.

U.S. Manufacturers in China: An Overview

Despite pleas from different U.S. businesses, the United States and China have not found a resolution to the ongoing economic and political tensions that arose back in 2018. As the conflicts grow from economic to ideological, it does not appear that this competition between the U.S. and China will dwindle anytime soon.

Amidst these conflicts, Mexico has been rising as a favorable alternative for manufacturing companies looking at other production locations, with distinct advantages over China as well as countries in Southeast Asia that have grown in popularity for their skilled workforce and cheap labor costs.

Mexico as an Alternative to China for Manufacturing

Mexico is fit to catch the fallout of the trade war between the United States and China, attracting manufacturers with the manufacturing industry’s stability and the country’s relationships with countries across the globe.

With more than 12 free trade agreements, more than any other country, Mexico offers businesses immediate access to global markets. The United States Mexico Canada Agreement (USMCA), for instance, allows manufacturers tariff-free transport of goods to and from the United States. In addition to being able to import and export at a reduced cost, companies can do so quickly thanks to the network of robust transport infrastructure connecting the two countries.

Mexico’s economic yet efficient manufacturing capabilities, in addition to its established relationship with the United States and other clear advantages over China, continue to attract global manufacturers and create a bright future for the country’s economy.

Other Advantages of Manufacturing in Mexico

Proximity to U.S. markets

Manufacturers can easily transport products and materials by ground, unlike those operating in China, who must ship everything destined for or arriving from U.S. markets by sea or air. Beyond driving down costs, the proximity between Mexico and the United States minimizes supply chain risks and disruptions, a critical factor to consider in the face of supply chain challenges presented by COVID-19.

As the United States’ southern neighbor, Mexico is also in the same time zone, meaning manufacturers can more easily manage their operations and perform onsite visits when necessary, affording them greater control over production processes.

Low labor costs

While manufacturing labor rates in Mexico are slightly higher when compared to China, rates in Mexico are still significantly lower than in the United States, so businesses can bring their operations back to North America while keeping costs of manufacturing down.

Skilled workforce

In addition to the country’s long history of manufacturing, the government has invested heavily in higher education and technical training programs, creating a highly skilled and diverse workforce that covers many different industries.

Fewer language barriers

Much of Mexico’s workforce is highly proficient in English. Furthermore, Spanish is the second most common language spoken in the United States, meaning manufacturers will likely experience fewer communication barriers than they might in other countries.

Protecting intellectual property

Already a part of more than ten different IP agreements, Mexico is continuously strengthening its IP protection measures. These protections outperform China’s in many key areas, including copyrights, trademarks, and patents.

Mexico shelter manufacturing

Mexico is unique for its IMMEX program, through which foreign companies can operate under a shelter company, allowing them to reduce lead times and focus on production quality while handing off critical yet complicated compliance and administrative responsibilities.

Ready to Start Moving Your Manufacturing Operations?

We’re ready to help. With our decades of expertise in providing administrative and compliance assistance to manufacturers in Mexico, we’ll get you up and running quickly with minimal risk and at minimal cost. Connect with NAPS today to learn more.

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