Manufacturing in Mexico vs China

Talented Labor

A long history of manufacturing in Mexico that spans over 60 years has led to a diverse, skilled, well-trained workforce that crosses over multiple generations and industries. Much of the working base comprises skilled and semi-skilled direct labor. This means that they have several
years of experience and are at least partly bilingual.

Labor rates in Mexico are now, in many cases, lower than China. In constant dollar terms, hourly manufacturing wages are lower than those in China. Mexico offers much steadier wages, making it easier for companies to forecast manufacturing costs.

 

Sourcing/Manufacturing in Mexico

Sourcing in Mexico is cheaper than sourcing in China. One of the most significant benefits of manufacturing in Mexico vs. China, especially for companies headquartered in the United States or Canada, is the reduced travel time to their Mexican facilities. In many cases, company
executives and their employees can be at their Mexico manufacturing plant within hours of leaving their home, something China cannot offer. Reducing corporate travel has a direct effect on expenses.

Manufacturing in Mexico has become more desirable as tariffs on Chinese goods and imports have increased due to trade negotiations between the United States and China.

 

Shipping Costs

Due to both distance and fluctuating oil prices, shipping costs are exponentially higher when manufacturing in China.

Furthermore, thanks to NAFTA/USMCA and the IMMEX program, goods produced in Mexico can reach their U.S. and Canadian destinations quickly and efficiently.

 

Energy Costs

Mexico’s natural gas prices are tied to those of the United States, which are relatively low in the global market thanks to a greater supply propelled by new gas and oil discoveries in the U.S. By comparison, natural gas prices can cost up to three times more in China.

Trade Agreements

Implemented in 1994, the North American Free Trade Agreement (NAFTA) allowed easy access for Mexican goods throughout the United States and Canada. NAFTA essentially changed Mexico from a closed economy to an export-oriented industrial economy. This also allowed for greater global expansion.

On July 1, 2020, The United States of America, the United Mexican States, and Canada Agreement (USMCA) went into force in all member states. It is a free trade agreement concluded between Canada, Mexico and the United States as a successor to the North American Free Trade Agreement (NAFTA). This is an agreement to modernize the 25-year-old NAFTA into a 21st century, high-standard agreement to support mutually beneficial trade
leading to freer markets, fairer trade, and robust economic growth in North America.