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Harris will be the best choice for nearshorers from the US, Mexico – and China.
by Andrew Hupert
I help international managers and front-line decision-makers navigate the realities of Globalism2.0. International business may not be as sexy as it once was, but it keeps the wheels of international trade turning.
August 20, 2024
End of the story first: Kamala Harris is probably the best of all possible worlds for nearshorers from the US, Mexico, and China. The good news is that Harris will be more of the same, and nearshorers love more of the same. This is not an innovation-driven economy, and Harris/Sheinbaum is LITERALLY a continuation of both previous administrations.
The bad news is China. A Harris admin can’t require Mexico to change FDI or government registration laws as they affect Chinese companies. That means that there’s nothing stopping state-supported Chinese companies setting up legal operations in Mexico and going about their business of complying with USMCA & IMMEX rules, just like everyone else. Hecho en Mexico. Made in Mexico – sold to the US through Costco and Amazon Prime.
What would a Harris presidency mean for nearshorers?
What a difference a few weeks can make in US politics. The last time we looked at nearshoring under new leadership, Biden was looking shaky, and Trump seemed like a superhero for surviving an assassination attempt. Our verdict then was that Mexico was still a good option, but that we’d all be left somewhat worse off by a new round of punitive tariffs and restrictions.
It’s still early days and Harriss may lose her momentum or drop the ball in some way, but as of late August it’s looking more and more feasible that Harris may continue the Biden administration’s policies on Mexico – for good or ill. While this will be a general continuation of existing policies, nearshorers can expect to work harder at compliance and foot the bill for popular new environmental and security programs.
5 Things Nearshorers need to know about the Harris Presidency.
1. USMCA looks like it will survive the 2026 review.
2. China will be the problem that just keeps giving for on both sides of the border.
3. New anti-China measures, environmental requirements, and compliance with US rules takes place on US territory. The Mexicans don’t have UFLPA or CHIPS, and they don’t have to worry about it. You do.
4. More compliance, more bureaucracy, more fees & taxes. These administrations are both big-gov interventionists. They like expensive social programs, paperwork, inspections, declarations, etc. Get those BoMs in order and be ready to defend your supply chain.
5. This is the best of all possible worlds for nearshorers – from the US, Mexico, and China.
Let’s look at each of those in a little more detail:
1. USMCA looks good. There’s a lot that can go wrong, but it looks like the USMCA will breeze through the 2026 review. There will be more on the environment. The US may try to find some way to make it more anti-China. Look for Regional Content Requirements to go up. You’ll have to prove your sustainability, and that your supply chain is clean of sanctioned goods, materials, and services. That means you have to be very careful who you buy from and who you partner with. Remember – complying with US rules like UFLPA and CHIPS is 100% your responsibility.
2. China will be the problem that just keeps giving. Trump had an overall plan for scaring China out of Mexico (mostly tariffs, but also entity-lists.) Harris has a lot of tools at her disposal, but managing Chinese FDI in Mexico is tricky. The Biden admin has a solid history of aggressively managing China trade, and Harris gets Trump tariffs and Biden’s CHIPS ACT & UFLPA just walking into office. More of the same. But the Chinese would be crazy to not make Mexico a major production center, and that’s exactly what they’re doing. It’s likely that both the Harris AND the Sheinbaum people will all be taken by surprise by the scale and scope of Chinese manufacturing.
3. All the China trade management is happening on the US side of the border. One thing we can expect from the Harris Admin is an increase in environmental & sustainability regulations – in addition to new declarations or inspections about China. The good news is that you’ll be on a truly level playing field compared to Chinese manufacturers. The bad news is that all the inspections and processing is going to happen in Texas or California. Mexico doesn’t have UFLPA or CHIPS. The first time that stuff is touching US soil is after you’ve bought it. Make sure your supply chains are clean. These are not Mexican problems.
4. More compliance expenses, more general expenses. This is a glass half full glass half empty scenario. The whole Nearshoring thing is a hit. Lots of people are making money. Environmental projects need funding, and schools and medical facilities aren’t going to fund themselves. You can see how this goes. The substantial risk here is that irresponsible or ill-conceived measures out of Washington cause log jams in California or Texas. But nearshorers can expect to pay more to play in this increasingly important market.
5. Best of all possible worlds. A Harris admin is the best of all possible options for nearshorers based in Mexico. The Nearshoring good times just keep on rolling. This is a market that loves consistency, and there won’t even be a hiccup to the process until 2026.
Final Word:
Let’s look at how a Harris Admin would view US-Mexico trade through the lenses of Border, Cartels, Drugs, China.
- Border
The Harris admin would continue its predecessor’s light touch on the border. This is one of the starkest differences between Harris and Trump – who views an open border as one of the nation’s biggest risks. The numbers lately have been a little better, but it’s still a very active issue in Washington. The Harris people will favor incremental approaches with bureaucratic solutions (gov programs, applications, temporary status), while the MAGA people across the aisle are probably going for much more direct actions. Border politics is going to break down into 3 areas: Immigrants, Drugs/trafficking, and commercial traffic. The Harris people won’t disrupt commercial traffic – but they will make it more expensive.
- Cartels
Harris didn’t show much interest in the Cartels when she was attorney general of California, so I wouldn’t expect it to be a major priority.
- Drugs.
Again, I don’t see anything bold or new. Enforcement has been stepped up lately – or the Mexican side is just getting lucky. Harris will maintain the systems in place. Remember – this is the same administration that has been combating Fentanyl for the last 4 years, and I wouldn’t expect any big new initiatives.
- China:
The US calls the shots here – on the US side of the border. The Mexican’s aren’t going to change their FDI procedures, so the Chinese will pile in. Mexican firms aren’t bound by UFLPA or sanctions, so there’s lots of dodgy stuff floating around in Mexican supply chains. The real risk, however, is to Mexican supply chains and manufacturers who will have trouble competing with China Inc. Mexico needs to start thinking about its own industry.
China will be the biggest potential threat to efficient US-Mexico trade and to international supply chains running through Mexico.