June 26, 2025
Manufacturing in Mexico vs. China: which is better?
By Marian Garibay | Guadalajara Regional Director at American Industries Group®
Published 04/14/2025
In recent years, there has been a noticeable trend of companies opting to move their manufacturing operations from China to Mexico. This shift is driven by geopolitical factors, including trade tensions between the US and China, rising tariffs, and supply chain disruptions, which have compelled businesses to reevaluate their long-term strategies. Many have discovered that manufacturing in Mexico can significantly improve their cost-effectiveness, logistical efficiency, and overall market competitiveness.
Key Industries in Each Country
In Mexico, the most prominent manufacturing sectors include automotive, aerospace, electronics, medical devices, machinery, and home appliances. Due to its proximity to the United States, these sectors benefit from fast market access and favorable trade agreements such as the USMCA. The automotive industry, in particular, stands out as one of the country’s top export drivers.
In China, the main industries are consumer electronics, heavy machinery, textiles, chemicals, and tech components. The country remains a global leader in large-scale production, especially in sectors that require high manufacturing volumes and an integrated supply chain.
Mexico vs. China: Manufacturing Industry Comparison
Mexico's allure as a manufacturing hub extends beyond mere geographical advantages. Most notably, it offers access to a vast network of free-trade and commercial agreements, ensuring openness to trade and easy access to regional markets. The availability of a highly skilled and technically proficient workforce adds to its competitive edge. Legal certainty in trade policies is reinforced through agreements like the USMCA, while its well-integrated regional value chains offer a mature supply chain infrastructure. This is complemented by world-class logistical capabilities, significantly reducing lead time and transportation costs.
Location
Mexico’s geographic location is one of its biggest assets. Its proximity to the U.S. enables faster delivery, lower transportation costs, and a more resilient supply chain. The USMCA also ensures smoother cross-border operations and legal certainty for U.S. manufacturers.
Logistics
Mexico has a modern, connected logistics infrastructure, including strategic ports on the Pacific and Gulf coasts, robust rail networks, and industrial corridors linked to the U.S. This geographic advantage enables just-in-time deliveries and reduces the risk of disruption.
By contrast, logistics in China depend heavily on long-distance maritime shipping, leading to longer delivery times, higher costs, and increased exposure to global disruptions.
Labor Costs
Mexico offers a technically skilled and reliable workforce with extensive experience in high-precision industries like automotive, aerospace, and electronics. Strong partnerships between industry and technical schools ensure a steady pipeline of qualified talent ready to meet evolving manufacturing demands.
Manufacturing Costs
Manufacturing in Mexico remains cost-effective due to its competitive labor market, modern infrastructure, and tax benefits through programs such as IMMEX. Although China still benefits from economies of scale, rising wages, stricter regulations, and increased logistics costs are diminishing its advantage.
Shipping Costs
Manufacturing in Mexico significantly lowers shipping costs to the U.S. and Canada thanks to its geographic proximity and free trade agreements. In contrast, shipping from China involves higher transportation fees, additional insurance, and longer transit times.
Transportation Costs
Mexico offers efficient ground transportation infrastructure with direct access to U.S. interstate highways. Meanwhile, China relies mainly on long-haul maritime and rail transport for its exports.
Trade Agreements and Tariffs
Mexico has access to over 50 countries through various trade agreements, including the USMCA, CPTPP, and treaties with the European Union, providing favorable tariff conditions. On the other hand, China has faced increasing tariffs from the U.S. in recent years, affecting its export competitiveness.
Exchange Rate
The Mexican peso has maintained relatively stable exchange rates against the U.S. dollar, providing businesses with financial predictability. In contrast, the Chinese yuan is subject to government controls and fluctuates in ways that may create uncertainty for foreign investors.
Foreign Investment in Mexico vs. China
Mexico has experienced a significant rise in foreign direct investment (FDI), especially from the U.S., driven by nearshoring. In 2023, Mexico surpassed China for the first time as the United States’ top trading partner. Automotive, electrical, and electronics industries are leading FDI inflows.
While China still receives high volumes of FDI, its growth has slowed due to trade tensions, internal policy challenges, and a growing preference for alternative regions in Asia and Latin America.
Challenges of Manufacturing in China
Although China has long been an attractive manufacturing hub, companies must be aware of the growing challenges associated with operating there:
- Language and cultural barriers that hinder direct communication
- Long distances that cause logistical delays
- Less transparent government policies
- Concerns over intellectual property and technology transfer
- Increasing risks due to ongoing U.S.-China trade tensions
Benefits of Near Sourcing in Mexico
One of the most impactful trends in global logistics and trade has been the rise of near sourcing, and Mexico has emerged as a key destination for this strategy. By relocating production closer to consumer markets, nearshoring provides several strategic and operational benefits beyond cost savings:
- Greater control and visibility over production
- Faster delivery and reduced lead times
- More flexibility to respond to market demand shifts
- Lower inventory in transit
- Easier on-site visits and audits
- Improved collaboration with suppliers
How Can Companies Relocate Manufacturing to Mexico?
Companies looking to move their manufacturing operations to Mexico should follow these steps:
- Evaluate their current supply chain to identify logistical, workforce, and regulatory needs.
- Select a strategic location, taking into account access to suppliers, industrial parks, and proximity to the U.S. border.
- Partner with a shelter service provider like American Industries, which facilitates fast, low-risk, and compliant market entry into Mexico.
American Industries has over 50 years of experience helping international companies launch and expand operations in Mexico. Our comprehensive shelter services include:
- Operational and legal management to comply with all fiscal, regulatory, and permitting requirements
- Recruitment and hiring of highly skilled personnel tailored to each industry
- Support in obtaining certifications such as IMMEX, VAT-IEPS, and OEA
- Leasing of industrial real estate in strategic locations
- Ongoing administrative support so your team can focus fully on production
Establishing operations in Mexico with the support of an experienced partner like American Industries minimizes risk, accelerates time to market, and ensures compliance with local laws.
Are you considering moving your manufacturing operations to Mexico?
Contact us today at start@americanindustriesgroup.com or call us at +1 (877) 341 8984 to learn how our shelter services can simplify your expansion and boost your competitive advantage.
Marian Garibay
Guadalajara Regional Director
American Industries Group®
If you would like to find out more about this topic or are interested in receiving a complimentary business case analysis for your operation in Mexico, please fill out this form or contact us at:
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