U.S. Election 2024 Trade Matters
Perspectives for commercial decision makers on how the 2024 U.S. election may impact trade policy and, in turn, supply chains.
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Trade with China
Jill Hurley Senior Director, Global Trade Consulting New York
Nearshoring
Jamie Adams Director, Global Trade Consulting Houston
USMCA
Michelle Stokes Senior Director, Global Trade Consulting Toronto
U.S.-Mexico Relations
Judith Álvarez Senior Global Trade Consultant Mexico City
Globalism and Trade
Gavin Everson Director, Global Trade Consulting London
The Experts
E-Commerce
Candace Sider Senior Vice President, North America Regulatory Affairs Toronto
By Jill Hurley Senior Director, Global Trade Consulting
U.S. industry leaders had been waiting on pins and needles for years to see if the Biden administration might do away with the Section 301 tariffs imposed by the previous Trump administration on goods entering the U.S. from China. Instead, the Biden administration has doubled down on the tariffs, keeping all of them in place and even raising the tariff rate on certain products while failing to renew previously existing exclusions. The decision to maintain the Section 301 tariffs is just the latest act to wean corporate America’s dependency off the world’s factory in the far east. In its earlier days, the Biden administration imposed the Uyghur Forced Labor Prevention Act (UFLPA), which sanctions all goods made in China’s Xinjiang region where human right abuses are reported to be taking place. The volume of shipments stopped at the border under suspicion of having material inputs from Uyghur forced labor – many of which are ultimately seized and barred from entry at the importer’s expense – continues to grow each year. Many of these shipments don’t even originate in China, but rather are transshipped through countries in Asia, such as Malaysia, Vietnam and others. In the event Joe Biden resumes the presidency, these policies are likely to remain in place for the long term. That’s not to say they would disappear under a Trump administration. On the contrary, it was Trump who introduced the tariffs in the first place and who is now suggesting Biden didn’t go far enough by keeping them in place or raising the rate on only some of them. He proposes the tariff rates should increase to 60% across the board. Yet focusing on China alone has become passé. The former president has now set his sights on a new boogeyman closer to home – Mexico. America’s largest trading partner has become a satellite for Chinese production, specifically electric vehicles, and has policymakers worried that American importers and their Chinese suppliers are circumventing the Section 301 tariffs by manufacturing goods in Mexico and bringing them into the U.S. duty free through the U.S.-Mexico-Canada-Agreement (USMCA). To counter this newest threat from China, the Trump campaign has proposed a tariff of 100% on all electric vehicles coming in from Mexico, plus a universal 10% tariff on all imports irrespective of origin – a one-up from the Biden administration’s original proposal to exempt Chinese-made electric vehicles from the controversial tax credit included in the Inflation Reduction Act. But Biden has now chosen to implement the same 100% tariff on Chinese EVs, though stopped short of the universal 10% tariff. And it’s not just the former president who has his sights set on circumventions of the tariffs placed on Chinese goods. A bipartisan bill by the House Ways and Means Committee is targeting Chinese e-commerce goods coming into the U.S. duty free. The so-called de minimis threshold gives individual parcels under $800 duty exemption, but policymakers on both sides of the aisle believe the program is being used to get around Section 301 tariffs by moving goods into the country in small parcels instead of bulk shipments. Over 60% of de minimis shipments are from China. While much of this is due to e-commerce merchants and marketplaces shifting to a direct-from-manufacturer fulfillment model to cut costs on warehousing, it nevertheless counteracts the effects of the Section 301 tariffs. Precisely how the Sino-U.S. relationship evolves in the coming years under either administration is anyone’s guess. What’s clear, however, is that the politics of trade is less about free trade vs. protectionism and more about moderate protectionism vs. aggressive protectionism. The impact on industry and how U.S.-based companies manage their sourcing and supply chains will be significant. Click here for more insights from Jill Hurley on how to navigate supply disruption stemming from the U.S.-China trade war.
Click here for more insights from Jill Hurley on how to navigate supply disruption stemming from the U.S.-China trade war.
"Divesting from China in favor of greener pastures isn’t clear cut. There are critical questions to be asked about the nature of the product and production process, the time sensitivity around getting product to end markets and the rules, regulations, taxes and tariffs that are going to impact landed costs for imported goods."
And it’s not just the former president who has his sights set on circumventions of the tariffs placed on Chinese goods. A bipartisan bill by the House Ways and Means Committee is targeting Chinese e-commerce goods coming into the U.S. duty free. The so-called de minimis threshold gives individual parcels under $800 duty exemption, but policymakers on both sides of the aisle believe the program is being used to get around Section 301 tariffs by moving goods into the country in small parcels instead of bulk shipments. Over 60% of de minimis shipments are from China. While much of this is due to e-commerce merchants and marketplaces shifting to a direct-from-manufacturer fulfillment model to cut costs on warehousing, it nevertheless counteracts the effects of the Section 301 tari Precisely how the Sino-U.S. relationship evolves in the coming years under either administration is anyone’s guess. What’s clear, however, is that the politics of trade is less about free trade vs. protectionism and more about moderate protectionism vs. aggressive protectionism. The impact on industry and how U.S.-based companies manage their sourcing and supply chains will be significant. Click here for more insights from Jill Hurley on how to navigate supply disruption stemming from the U.S.-China trade war.
By Jamie Adams Director, Global Trade Consulting
The predictable (and intended) outcome of Washington’s tariffing of all imports coming from China has been a not-so-gradual shift away from a reliance on Asia’s economic hegemon for manufacturing. This is not to say that manufacturing has returned to America’s shores in waves, but rather that multinationals are hedging their bets against a singular source for product inputs. The result has been a notable spike in goods coming from other locales in the far east, such as Vietnam, Thailand, Bangladesh and India. But by far the greatest beneficiary of Washington’s trade war with Beijing has been Mexico where industries such as automotive, steel, plastics and aerospace have seen a significant spike in foreign direct investment. In some cases, these were expansions of existing facilities, in others greenfield activity. But China’s caught on quickly to this trend and has mobilized to insert itself into the equation by having its state-owned enterprises (SOEs) set up shop in Mexico where they’ve been manufacturing various products. Most notably, Chinese electric vehicles have been moving into the U.S. at growing numbers and production was anticipated to increase dramatically, catching the eye of the U.S. policymakers who have now moved to place a 100% tariff on all Chinese EVs coming into the U.S. from Mexico. Not enough, says the Trump campaign, which has proposed slapping significant tariffs on all autos coming in from Mexico unless the import of Chinese EVs comes to a dead halt. The row over Chinese EVs – though of little consequence outside the EV market – is a case in point on the risks of nearshoring. To be sure, nearshoring is a sound strategy for those looking to de-risk against overseas production, but it doesn’t come without its complications. The obvious benefits are the geographic proximity and the ability to make use of the United States-Mexico-Canada Agreement (USMCA), but making use of that agreement comes with heavy administrative burden that’s not easily absorbed by most corporations’ compliance teams. It’s also not a panacea for duty avoidance as goods qualifying under the USMCA may very well remain subject to Section 301 goods if their transformation in Mexico is found to be unsubstantial. Moreover, as America’s trade deficit with Mexico continues to grow (it’s currently growing so rapidly that it’s on pace to break a world record this year) so too will discomfort within U.S. industries that feel the heat of competition from south of the border. By the time the USMCA undergoes its first review in 2026, the U.S.-Mexico relationship is likely to be a point of discussion if not a point of contention. That doesn’t necessarily mean U.S. companies should start hedging their bets against Mexico just yet, but it does mean there should be some consideration given to “nearshoring diversification.” Canada too has been a beneficiary of the U.S.-China trade war with imports from Canada jumping from $318 billion in 2019 (the first full year of the trade war) to $418 billion in 2023. That’s an increase of 31% in a short period of time. And for good reason. Canada boasts the same geographic proximity, but also a much larger skilled workforce and more harmonized regulatory requirements. But for U.S. companies that are selling to the Canadian market, setting up shop in Canada could mean taking advantage of free trade without having to take production out of Asia (or at least not entirely). That’s because Canada enjoys free trade with a number of countries in Southeast Asia through the Comprehensive and Economic Agreement for Trans-Pacific Partnership (CPTPP), a trade deal in which the Trump administration chose not to participate. With Mexico having just elected a new president and Canadians going to the polls next year, a change in the White House could conceivably mean three relatively new leaders across North America by late 2025, all of whom will be looking to secure the interests of their industries. Precisely how that will play out in the theatre of trade relations will be pivotal in how and where business leaders choose to funnel their investments. Click here to gain insights from Jamie Adams, on the commercial practicalities of nearshoring.
Click here to gain more insights from Jamie Adams, on the commercial practicalities of nearshoring.
"Firms engaged in nearshoring should consider diversifying their sourcing and strategically locating their U.S. production facilities to take advantage of the geographic proximity of both Mexico and Canada."
U.S. industry leaders had been waiting on pins and needles for years to see if the Biden administration might do away with the Section 301 tariffs imposed by the previous Trump administration on goods entering the U.S. from China. Instead, the Biden administration has doubled down on the tariffs, keeping all of them in place and even raising the tariff rate on certain products while failing to renew previously existing exclusions. The decision to maintain the Section 301 tariffs is just the latest act to wean corporate America’s dependency off the world’s factory in the far east. In its earlier days, the Biden administration imposed the Uyghur Forced Labor Prevention Act (UFLPA), which sanctions all goods made in China’s Xinjiang region where human right abuses are reported to be taking place. The volume of shipments stopped at the border under suspicion of having material inputs from Uyghur forced labor – many of which are ultimately seized and barred from entry at the importer’s expense – continues to grow each year. Many of these shipments don’t even originate in China, but rather are transshipped through countries in Asia, such as Malaysia, Vietnam and others. In the event Joe Biden resumes the presidency, these policies are likely to remain in place for the long term. That’s not to say they would disappear under a Trump administration. On the contrary, it was Trump who introduced the tariffs in the first place and who is now suggesting Biden didn’t go far enough by keeping them in place or raising the rate on only some of them. He proposes the tariff rates should increase to 60% across the board. Yet focusing on China alone has become passé. The former president has now set his sights on a new boogeyman closer to home – Mexico. America’s largest trading partner has become a satellite for Chinese production, specifically electric vehicles, and has policymakers worried that American importers and their Chinese suppliers are circumventing the Section 301 tariffs by manufacturing goods in Mexico and bringing them into the U.S. duty free through the U.S.-Mexico-Canada-Agreement (USMCA). To counter this newest threat from China, the Trump campaign has proposed a tariff of 100% on all electric vehicles coming in from Mexico, plus a universal 10% tariff on all imports irrespective of origin – a one-up from the Biden administration’s original proposal to exempt Chinese-made electric vehicles from the controversial tax credit included in the Inflation Reduction Act. But Biden has now chosen to implement the same 100% tariff on Chinese EVs, though stopped short of the universal 10% tariff.
The row over Chinese EVs – though of little consequence outside the EV market – is a case in point on the risks of nearshoring. To be sure, nearshoring is a sound strategy for those looking to de-risk against overseas production, but it doesn’t come without its complications. The obvious benefits are the geographic proximity and the ability to make use of the United States-Mexico-Canada Agreement (USMCA), but making use of that agreement comes with heavy administrative burden that’s not easily absorbed by most corporations’ compliance teams. It’s also not a panacea for duty avoidance as goods qualifying under the USMCA may very well remain subject to Section 301 goods if their transformation in Mexico is found to be unsubstantial. Moreover, as America’s trade deficit with Mexico continues to grow (it’s currently growing so rapidly that it’s on pace to break a world record this year) so too will discomfort within U.S. industries that feel the heat of competition from south of the border. By the time the USMCA undergoes its first review in 2026, the U.S.-Mexico relationship is likely to be a point of discussion if not a point of contention. That doesn’t necessarily mean U.S. companies should start hedging their bets against Mexico just yet, but it does mean there should be some consideration given to “nearshoring diversification.” Canada too has been a beneficiary of the U.S.-China trade war with imports from Canada jumping from $318 billion in 2019 (the first full year of the trade war) to $418 billion in 2023. That’s an increase of 31% in a short period of time. And for good reason. Canada boasts the same geographic proximity, but also a much larger skilled workforce and more harmonized regulatory requirements. But for U.S. companies that are selling to the Canadian market, setting up shop in Canada could mean taking advantage of free trade without having to take production out of Asia (or at least not entirely). That’s because Canada enjoys free trade with a number of countries in Southeast Asia through the Comprehensive and Economic Agreement for Trans-Pacific Partnership (CPTPP), a trade deal in which the Trump administration chose not to participate. With Mexico having just elected a new president and Canadians going to the polls next year, a change in the White House could conceivably mean three relatively new leaders across North America by late 2025, all of whom will be looking to secure the interests of their industries. Precisely how that will play out in the theatre of trade relations will be pivotal in how and where business leaders choose to funnel their investments. Click here to gain insights from Jamie Adams, on the commercial practicalities of nearshoring.
By Michelle Stokes Senior Director, Global Trade Consulting
While North American businesses are keeping a close eye on the outcome of the elections in Mexico, the U.S. and Canada (in that order), there's another event a little farther afield that has the potential to dramatically alter the investment climate across the continent – the first USMCA review. When NAFTA was renegotiated between 2017 and 2019, one of the sticking points was the shelf life of the deal. After much back and forth, the parties agreed that a clause would be inserted to allow for a review of the new United States-Mexico-Canada Agreement (USMCA) after a six-year period. During that review, member states would have the opportunity to air their grievances with the functionality of the agreement and the degree to which they wish to continue participating in it. Given the number of disputes that have emerged since the agreement went into effect on July 1, 2020, there’s good reason to be anxious that the trade deal won’t get a rubber stamp from the parties. Canada and the U.S. continue to be at odds over the former’s accommodation of U.S. dairy products into its market. While a dispute panel has already ruled in Canada’s favor, the U.S. continues to demand Canada ease its restrictions on American dairy. The U.S. continues to express concerns about Mexico’s nationalization of the energy sector, noting the exclusion of U.S. companies from competing in the sector is in contravention of the USMCA. Many in Mexico’s business community hope newly minted President Claudia Sheinbaum will reverse the policies of predecessor Andrés Manuel López Obrador (or AMLO for short). But that’s still very much up in the air. Then there’s the ever-vexing issue of automotive roll-up rules, which have little impact outside the sector but have profound implications on automakers and auto parts manufacturers. Similar to the dairy issue, a dispute-resolution panel has already voted in favor of Canada and Mexico, but U.S. officials have yet to indicate how or whether they will respond to the resolution and accommodate the roll-up rules. For the uninitiated, the “roll-up” refers to the ability of automakers to classify specific parts of an automobile as being 100% originating in North America if they meet the minimum regional content requirements set out by the USMCA. The U.S. says doing so is unacceptable and that the calculations must be precise. The automakers and their parts manufacturers say the U.S. demand would be overly burdensome administratively and would discourage use of the USMCA altogether. To add to all of this, there are nagging disputes over agriculture, such as Mexico’s move to block the import of genetically modified corn from the U.S. and America’s move to investigate potential tariffs on Mexican tomatoes (a dispute that has been ongoing since the early 1990s). In other words, there’s no shortage of discord between the USMCA parties that could create friction over the fate of the trade deal when it’s up for review in 2026. How those disputes get resolved will depend on how the leaders of the various countries and their trade representatives play nice in the sandbox. The Biden administration, while less vocal than the Trump administration, has ultimately maintained a protectionist position. However, there’s little reason to believe current U.S. Trade Representative Katherine Tai has any desire to upend the trade deal. The same could be said for the existing governments in Mexico and Canada. A return to a Trump administration could see more of a hardball approach to finding resolution to these disputes, bringing a return to the tumultuous days of 2018 and 2019 when investment confidence in North American cooled in response to uncertainty over the fate of free trade. Commercial decision makers will want to watch these disputes and any emerging ones closely (and how politicians and policymakers address them). Like everything else in trade, diversification is key, but even in the face of a potential scaling back of free trade in North America, regional integration of supply chains remains a safer bet than wholesale reliance on overseas suppliers and manufacturers. Click here to gain more insights from Michelle Stokes, on why regionally integrated supply chains make sense.
Click here to gain more insights from Michelle Stokes, on why regionally integrated supply chains make sense.
"It’s important not to be too pollyannaish about the fate of the continent’s trade. The reality is that many of the conflicts that were emblematic of the fraught NAFTA renegotiation are still very much present."
The predictable (and intended) outcome of Washington’s tariffing of all imports coming from China has been a not-so-gradual shift away from a reliance on Asia’s economic hegemon for manufacturing. This is not to say that manufacturing has returned to America’s shores in waves, but rather that multinationals are hedging their bets against a singular source for product inputs. The result has been a notable spike in goods coming from other locales in the far east, such as Vietnam, Thailand, Bangladesh and India. But by far the greatest beneficiary of Washington’s trade war with Beijing has been Mexico where industries such as automotive, steel, plastics and aerospace have seen a significant spike in foreign direct investment. In some cases, these were expansions of existing facilities, in others greenfield activity. But China’s caught on quickly to this trend and has mobilized to insert itself into the equation by having its state-owned enterprises (SOEs) set up shop in Mexico where they’ve been manufacturing various products. Most notably, Chinese electric vehicles have been moving into the U.S. at growing numbers and production was anticipated to increase dramatically, catching the eye of the U.S. policymakers who have now moved to place a 100% tariff on all Chinese EVs coming into the U.S. from Mexico. Not enough, says the Trump campaign, which has proposed slapping significant tariffs on all autos coming in from Mexico unless the import of Chinese EVs comes to a dead halt.
It’s important not to be too pollyannaish about the fate of the continent’s trade. The reality is that many of the conflicts that were emblematic of the fraught NAFTA renegotiation are still very much present.
Then there’s the ever-vexing issue of automotive roll-up rules, which have little impact outside the sector but have profound implications on automakers and auto parts manufacturers. Similar to the dairy issue, a dispute-resolution panel has already voted in favor of Canada and Mexico, but U.S. officials have yet to indicate how or whether they will respond to the resolution and accommodate the roll-up rules. For the uninitiated, the “roll-up” refers to the ability of automakers to classify specific parts of an automobile as being 100% originating in North America if they meet the minimum regional content requirements set out by the USMCA. The U.S. says doing so is unacceptable and that the calculations must be precise. The automakers and their parts manufacturers say the U.S. demand would be overly burdensome administratively and would discourage use of the USMCA altogether. To add to all of this, there are nagging disputes over agriculture, such as Mexico’s move to block the import of genetically modified corn from the U.S. and America’s move to investigate potential tariffs on Mexican tomatoes (a dispute that has been ongoing since the early 1990s). In other words, there’s no shortage of discord between the USMCA parties that could create friction over the fate of the trade deal when it’s up for review in 2026. How those disputes get resolved will depend on how the leaders of the various countries and their trade representatives play nice in the sandbox. The Biden administration, while less vocal than the Trump administration, has ultimately maintained a protectionist position. However, there’s little reason to believe current U.S. Trade Representative Katherine Tai has any desire to upend the trade deal. The same could be said for the existing governments in Mexico and Canada. A return to a Trump administration could see more of a hardball approach to finding resolution to these disputes, bringing a return to the tumultuous days of 2018 and 2019 when investment confidence in North American cooled in response to uncertainty over the fate of free trade. Commercial decision makers will want to watch these disputes and any emerging ones closely (and how politicians and policymakers address them). Like everything else in trade, diversification is key, but even in the face of a potential scaling back of free trade in North America, regional integration of supply chains remains a safer bet than wholesale reliance on overseas suppliers and manufacturers. Click here to gain more insights from Michelle Stokes, on why regionally integrated supply chains make sense.
Trade with Mexico
By Judith Álvarez Senior Global Trade Consultant
The recent election of Claudia Sheinbaum as the first female president of Mexico was more a formality than anything else. There was little doubt that Sheinbaum – handpicked by her predecessor to nurture and progress the left-leaning populism he had so successfully cultivated – would be elected the country’s new head of state. With her now at the helm, the big question remaining is the extent to which she will keep with the Morena’s party’s “fourth transformation” initiative, which promises to neutralize the gap between Mexico’s elites and its more dominant working class. The other question is what impact will that brand of economic nationalism and approach to trade with the U.S. have on relations with Mexico's most important trading partner. Sheinbaum and her administration arguably have far more negotiating power with the U.S. than at any time in the past. Washington’s move to make trade with China prohibitively expensive vis-à-vis onerous tariff barriers, has prompted many U.S. firms to shift some or all of their production to Mexico. Dubbed “nearshoring,” the trend allows production to take place with competitively priced labor much closer to end markets and with the option of duty exemption through the United States-Mexico-Canada Agreement (USMCA). The outcome has been an explosion of foreign direct investment (FDI) in Mexico where investment inflows have gone from $28.2 billion in 2020 to $35.3 billion in 2023, a 15% increase in five years. Cross-border mergers and acquisitions have grown at a far greater pace. Mexico has replaced China as the U.S.’s largest trading partner with total trade transactions soaring from $612 billion in 2019 (the first full year of the U.S.-China trade war) to $798 billion, an increase of 30% in just five years. Yet, U.S. investors continue to express concern over what they see as barriers to Mexico’s full potential, including security (at the border and beyond), industrial policies that discourage investment, nationalization of industries and – in some areas – inadequate infrastructure. The other X factor will be the rising tide of Chinese investment in Mexico. China has responded to Washington’s tariffs on its imports by buying up an increasing footprint of commercial space in Mexico. BYD, China’s largest electric vehicle manufacturer, has already expressed interest in setting up shop in Mexico to manufacture electric vehicles. Washington is already viewing the move with suspicion, believing that BYD – which is subsidized by the Chinese government – is looking to circumvent America’s existing tariffs by producing in Mexico and taking advantage of duty savings through the USMCA. The Trump campaign was quick to jump on the mere possibility of China flooding the U.S. with cheap EVs by suggesting he would impose a 100% tariff on all EVs coming out of Mexico made by Chinese companies. The Biden administration hasn’t yet stated how it will respond, but some response is anticipated. One way or another, Mexico’s relationship with China will be a point of contention for U.S. officials and a likely wedge issue during the 2026 USMCA review, which could put the trade deal at risk of further alteration or abandonment. The bigger picture for U.S. investors will be to watch how and if Washington’s scrutiny of EVs coming out of Mexico bleeds into other industries. With many companies shifting investment away from China and into other countries, the U.S. Trade Representative’s office has its sights set on those emerging countries that might compete with U.S. domestic industry. It’s too early to say what, if any, protections or barriers the U.S. government might put in place against Mexico’s rise (or any other country’s), but investors must balance the obvious advantages of Mexico as an alternative to China with the potential risk of barriers against Mexico should China’s influence in the country grow, or USMCA disputes continue to heat up. That requires strategic supply chain planning that includes some redundancy and regional diversification. But there is no one-size-fits-all strategy; each industry will have different considerations and these will be critical in the decision making process. Click here to gain more insights from Judith Álvarez, on how the intersecting of changes in the U.S. and Mexican governments will impact U.S. supply chains in Mexico.
Click here to gain more insights from Judith Álvarez, on how the intersecting of changes in the U.S. and Mexican governments will impact U.S. supply chains in Mexico.
"As U.S. companies leverage Mexico as an alternative to China, they will need to scrutinize their supply chains more than ever. Customs officials are on the lookout not only for illicit goods, but goods made for or by sanctioned parties, the list for which is growing weekly."
By Judith Álvarez Senior Consultant, Global Trade Consulting
While North American businesses are keeping a close eye on the outcome of the elections in Mexico, the U.S. and Canada (in that order), there's another event a little farther afield that has the potential to dramatically alter the investment climate across the continent – the first USMCA review. When NAFTA was renegotiated between 2017 and 2019, one of the sticking points was the shelf life of the deal. After much back and forth, the parties agreed that a clause would be inserted to allow for a review of the new United States-Mexico-Canada Agreement (USMCA) after a six-year period. During that review, member states would have the opportunity to air their grievances with the functionality of the agreement and the degree to which they wish to continue participating in it. Given the number of disputes that have emerged since the agreement went into effect on July 1, 2020, there’s good reason to be anxious that the trade deal won’t get a rubber stamp from the parties. Canada and the U.S. continue to be at odds over the former’s accommodation of U.S. dairy products into its market. While a dispute panel has already ruled in Canada’s favor, the U.S. continues to demand Canada ease its restrictions on American dairy. The U.S. continues to express concerns about Mexico’s nationalization of the energy sector, noting the exclusion of U.S. companies from competing in the sector is in contravention of the USMCA. Many in Mexico’s business community hope newly minted President Claudia Sheinbaum will reverse the policies of predecessor Andrés Manuel López Obrador (or AMLO for short). But that’s still very much up in the air.
The other X factor will be the rising tide of Chinese investment in Mexico. China has responded to Washington’s tariffs on its imports by buying up an increasing footprint of commercial space in Mexico. BYD, China’s largest electric vehicle manufacturer, has already expressed interest in setting up shop in Mexico to manufacture electric vehicles. Washington is already viewing the move with suspicion, believing that BYD – which is subsidized by the Chinese government – is looking to circumvent America’s existing tariffs by producing in Mexico and taking advantage of duty savings through the USMCA. The Trump campaign was quick to jump on the mere possibility of China flooding the U.S. with cheap EVs by suggesting he would impose a 100% tariff on all EVs coming out of Mexico made by Chinese companies. The Biden administration hasn’t yet stated how it will respond, but some response is anticipated. One way or another, Mexico’s relationship with China will be a point of contention for U.S. officials and a likely wedge issue during the 2026 USMCA review, which could put the trade deal at risk of further alteration or abandonment. The bigger picture for U.S. investors will be to watch how and if Washington’s scrutiny of EVs coming out of Mexico bleeds into other industries. With many companies shifting investment away from China and into other countries, the U.S. Trade Representative’s office has its sights set on those emerging countries that might compete with U.S. domestic industry. It’s too early to say what, if any, protections or barriers the U.S. government might put in place against Mexico’s rise (or any other country’s), but investors must balance the obvious advantages of Mexico as an alternative to China with the potential risk of barriers against Mexico should China’s influence in the country grow, or USMCA disputes continue to heat up. That requires strategic supply chain planning that includes some redundancy and regional diversification. But there is no one-size-fits-all strategy; each industry will have different considerations and these will be critical in the decision making process. Click here to gain more insights from Judith Álvarez, on how the intersecting of changes in the U.S. and Mexican governments will impact U.S. supply chains in Mexico.
By Gavin Everson Director, Global Trade Consulting
Things are looking up for global trade. After a year of weak activity where trade in goods saw a contraction of 1.2%, the World Trade Organization is forecasting growth of 2.6% in in 2024 and 3.3% in 2025. Yet, even as trade activity perks up, the actual rules-based system that has governed that activity remains very ill and its fate very much uncertain. The WTO, the international body that set out those rules and regulates how trade evolves continues to be an impotent organization. There appears to be little impetus on the part of either the Biden administration or Trump campaign to restore the organization to its former glory by appointing appellate court judges to adjudicate disputes between nations. The court’s bias against the U.S. – be it real or perceived – has become a bi-partisan issue and neither of America’s key parties is interested in taking great strides to revive it, though sprouts of hope that it will be revived by the end of the year have emerged recently. The critique of the appellate court’s mandate isn’t the only evidence that Washington is retreating from the global trading order. The trade war between itself and China (the two largest trading countries in the world) has precipitated a broad range of tariff barriers. In addition, the Biden administration chose in its early days not to renew the Generalized System of Preferences (GSP), a long-standing program that provided preferential duty rates to developing nations. There is little indication from the Trump campaign that it will reverse course on the matter. Add to this the weekly growth of sanctions against bad actors, particularly those supporting the war in Russia, and it’s very clear that America is retreating into a more insular form of commerce that encourages domestic production even if that production makes U.S. products less price competitive globally. Rather than taking the approach of other G7 nations that have doubled down on their commitment to the global trading system by entering into multilateral agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) or still-in-negotiation MERCOSUR deal between the European Union and South America’s top economies, the U.S. has chosen a more tenuous approach to multilateralism. A perfect example is the Indo-Pacific Economic Framework for Prosperity (IPEF), a Biden-administration-initiated economic initiative. Rather than remove tariff barriers, the deal seeks to create harmonization of digital industries and data sharing while fortifying U.S. supply chains against disruption for sensitive sectors and discouraging corruption and criminal practices such as bribery and money laundering. There was brief hope in 2023 that a transatlantic union in the form of a foundational trade pact between the U.S. and UK may someday become a reality. Those hopes have now been dashed after the deal was shelved in response to U.S. senate opposition. The Trump campaign has indicated the presidential hopeful would make a U.S.-UK trade deal a priority. By then, however, the deal could very well face opposition on the other side of the Pond where a center-left government has been elected to replace the current Conservative administration and is likely to dig in its heels against the entry of U.S. hormone-induced meat into the UK. The issue has long been a sticking point in negotiations between the two parties. In short, the U.S. is becoming far more insular than it had been previously with two presidential candidates attempting to outdo one another as to the degree of trade protectionism they can put forward. The outcome is that commercial enterprises that rely on global supply and global markets will face increasing headwinds in their supply chains and market competitiveness. That’s not to suggest there aren’t mechanisms to alleviate some of the pain points they are inevitably feeling, but navigating these becomes a bit of a chess-board approach to supply management. Click here to gain insights from Gavin Everson, on how enterprises can navigate a world in which the U.S. is retreating from the global trading system.
Click here to gain insights from Gavin Everson, on how enterprises can navigate a world in which the U.S. is retreating from the global trading system.
"Trade relations between the U.S. and its partners across the Atlantic will need to be watched closely by investors, particularly those with a stake in trans-Atlantic trade. Relations between the U.S. and EU have been cordial in recent years, but key geopolitical issues continue to create tension."
The recent election of Claudia Sheinbaum as the first female president of Mexico was more a formality than anything else. There was little doubt that Sheinbaum – handpicked by her predecessor to nurture and progress the left-leaning populism he had so successfully cultivated – would be elected the country’s new head of state. With her now at the helm, the big question remaining is the extent to which she will keep with the Morena’s party’s “fourth transformation” initiative, which promises to neutralize the gap between Mexico’s elites and its more dominant working class. The other question is what impact will that brand of economic nationalism and approach to trade with the U.S. have on relations with Mexico's most important trading partner. Sheinbaum and her administration arguably have far more negotiating power with the U.S. than at any time in the past. Washington’s move to make trade with China prohibitively expensive vis-à-vis onerous tariff barriers, has prompted many U.S. firms to shift some or all of their production to Mexico. Dubbed “nearshoring,” the trend allows production to take place with competitively priced labor much closer to end markets and with the option of duty exemption through the United States-Mexico-Canada Agreement (USMCA). The outcome has been an explosion of foreign direct investment (FDI) in Mexico where investment inflows have gone from $28.2 billion in 2020 to $35.3 billion in 2023, a 15% increase in five years. Cross-border mergers and acquisitions have grown at a far greater pace. Mexico has replaced China as the U.S.’s largest trading partner with total trade transactions soaring from $612 billion in 2019 (the first full year of the U.S.-China trade war) to $798 billion, an increase of 30% in just five years. Yet, U.S. investors continue to express concern over what they see as barriers to Mexico’s full potential, including security (at the border and beyond), industrial policies that discourage investment, nationalization of industries and – in some areas – inadequate infrastructure.
Trade relations between the U.S. and its partners across the Atlantic will need to be watched closely by investors, particularly those with a stake in trans-Atlantic trade. Relations between the U.S. and EU have been cordial in recent years, but key geopolitical issues continue to create tension.
Click here to gain more insights from Gavin Everson, on how enterprises can navigate a world in which the U.S. is retreating from the global trading system.
Rather than taking the approach of other G7 nations that have doubled down on their commitment to the global trading system by entering into multilateral agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) or still-in-negotiation MERCOSUR deal between the European Union and South America’s top economies, the U.S. has chosen a more tenuous approach to multilateralism. A perfect example is the Indo-Pacific Economic Framework for Prosperity (IPEF), a Biden-administration-initiated economic initiative. Rather than remove tariff barriers, the deal seeks to create harmonization of digital industries and data sharing while fortifying U.S. supply chains against disruption for sensitive sectors and discouraging corruption and criminal practices such as bribery and money laundering. There was brief hope in 2023 that a transatlantic union in the form of a foundational trade pact between the U.S. and UK may someday become a reality. Those hopes have now been dashed after the deal was shelved in response to U.S. senate opposition. The Trump campaign has indicated the presidential hopeful would make a U.S.-UK trade deal a priority. By then, however, the deal could very well face opposition on the other side of the Pond where a center-left government has been elected to replace the current Conservative administration and is likely to dig in its heels against the entry of U.S. hormone-induced meat into the UK. The issue has long been a sticking point in negotiations between the two parties. In short, the U.S. is becoming far more insular than it had been previously with two presidential candidates attempting to outdo one another as to the degree of trade protectionism they can put forward. The outcome is that commercial enterprises that rely on global supply and global markets will face increasing headwinds in their supply chains and market competitiveness. That’s not to suggest there aren’t mechanisms to alleviate some of the pain points they are inevitably feeling, but navigating these becomes a bit of a chess-board approach to supply management. Click here to gain insights from Gavin Everson, on how enterprises can navigate a world in which the U.S. is retreating from the global trading system.
By Candace Sider Senior Vice President, North America, Regulatory Affairs
One of the core biproducts of the recent pandemic was the meteoric rise of e-commerce adoption. In 2019, just prior to the pandemic, e-commerce sales represented 13.6% of retail sales. Today that number is 21.8% and is projected to grow considerably in the coming years. E-commerce is big business. Retailers have invested billions collectively into the adoption and/or improvement of e-commerce platforms to facilitate online sales and returns. But big business and politics don’t always mix well. The rise of e-commerce has caught the attention of some policymakers who fear the influx of e-commerce parcels are counteracting the tariffs placed on imports from China, which have thus far levied $221 billion in import duties for U.S. Customs and Border Protection (CBP). The policymakers – who, it should be noted, are both Republicans and Democrats – believe the low-value threshold of $800 that exempts parcels from duty assessment is a convenient way for importers and their overseas partners to circumvent the tariffs. They want the threshold removed or for imports from China to be excluded from the exemption. The outcome will not only be millions of additional items for CBP to formally review, but an inevitable barrier to additional e-commerce adoption. Consumers flock to e-commerce for good deals. The added cost of duties and administrative fees associated with the entry of e-commerce parcels will inevitably be passed down to consumers, negating potential cost savings. Challenging the efficacy and value of exempting low-value parcels from customs duties may make for interesting politics, but it will inevitably rub industry leaders the wrong way. The National Foreign Trade Council, which represents U.S. businesses engaged in global trade, has already written to the U.S. administration to caution against tampering with the de minimis (the formal name of the low-value threshold). Other groups representing industry are likely to follow, arguing removal of the threshold will contribute to inflation, reduce competitiveness through in-kind retaliation by America’s trading partners, and add unnecessary administrative burden to border-clearance processes. The challenge for industry leaders, however, will be to overcome the ubiquity of the China boogeyman syndrome that has taken over Washington. With policymakers on both sides of Congress targeting China and Chinese commerce, industry will have to appease the inherent bias they are up against. To achieve this, they will likely need to focus on the impact not on themselves but on the consumers who hold voting power, and to which the policymakers and their parties are beholden. To be sure, this issue has seen little congressional discourse thus far and isn’t likely to be headline news. Few trade-related issues ever are. But the implications on industry, consumers and trade relations have the potential to be quite profound. Just as the Section 301 tariffs against China fell into news-cycle obscurity, so too will this. Yet just as those tariffs have cost American businesses and, in turn, consumers hundreds of billions of dollars in new taxes, so too will this. Click here to gain more insights from Candace Sider on how post-election policy could transform the e-commerce landscape.
Click here to gain insights from Candace Sider, on how e-commerce facilitators can help to reduce the risk of the de minims theshold being removed.
Lowering the de minimis to its historically low level wouldn’t necessarily counteract the volume of de minimis shipments as most would still fall within the threshold.
Click here to gain more insights from Candace Sider e-commerce faciltiators can help reduce the risk of the de minimis threshold being removed.
Challenging the efficacy and value of exempting low-value parcels from customs duties may make for interesting politics, but it will inevitably rub industry leaders the wrong way. The National Foreign Trade Council, which represents U.S. businesses engaged in global trade, has already written to the U.S. administration to caution against tampering with the de minimis (the formal name of the low-value threshold). Other groups representing industry are likely to follow, arguing removal of the threshold will contribute to inflation, reduce competitiveness through in-kind retaliation by America’s trading partners, and add unnecessary administrative burden to border-clearance processes. The challenge for industry leaders, however, will be to overcome the ubiquity of the China boogeyman syndrome that has taken over Washington. With policymakers on both sides of Congress targeting China and Chinese commerce, industry will have to appease the inherent bias they are up against. To achieve this, they will likely need to focus on the impact not on themselves but on the consumers who hold voting power, and to which the policymakers and their parties are beholden. To be sure, this issue has seen little congressional discourse thus far and isn’t likely to be headline news. Few trade-related issues ever are. But the implications on industry, consumers and trade relations have the potential to be quite profound. Just as the Section 301 tariffs against China fell into news-cycle obscurity, so too will this. Yet just as those tariffs have cost American businesses and, in turn, consumers hundreds of billions of dollars in new taxes, so too will this. Click here to gain insights from Candace Sider on how e-commerce facilitators can help reduce the risk of the de minimis threshold being removed.
