Jorge Gonzalez Henrichsen, Head of Business Development and Co-CEO at The Nearshore Company.
If there’s one word that best describes the current climate around U.S.-Mexico trade, it’s uncertainty. Ever since former President Trump announced plans to impose a 25% tariff on Mexican goods, companies with nearshoring strategies have been left wondering: What does this mean for my business? Should I keep moving forward with my plans in Mexico, or do I hit the brakes?
As a company deeply dependent on cross-border commerce, we’ve spent countless hours speaking with clients, trade experts and customs brokers to get a sense of what’s happening on the ground. What we’re seeing is a tale of two extremes: Some companies are in full-blown panic mode, while others are taking a wait-and-see approach to see if the tariffs will stick around. The truth, as always, lies somewhere in between.
Uncertainty versus risk: Why are businesses hesitant?
One of the biggest challenges in navigating this tariff situation is that it isn’t just about risk—it’s about uncertainty. Businesses know how to manage risk. Insurance companies, for example, calculate and mitigate risk all the time. But uncertainty? That’s a different beast. It makes planning nearly impossible.
In prior years, many companies operating under the U.S.-Mexico-Canada Agreement (USMCA) paid limited attention to the declared value of goods crossing the border. Duties were zero or minimal, so as long as everything was documented correctly, there wasn’t much reason to worry. (At the time of this writing, goods from Mexico that aren’t covered by the USMCA, as well as steel, aluminum and automotives, are subject to 25% tariffs.) With the uncertainty surrounding tariffs, our clients are scrutinizing every detail—double-checking invoices, questioning valuation methods and seeking legal counsel to understand their true exposure.
At the core of this debate is a fundamental question: Will these tariffs bring manufacturing back to the U.S.? It’s hard to say. The U.S. is facing a shrinking working-age population, a trend that was previously offset by immigration. With legal immigration becoming more restrictive and increased efforts to reduce illegal immigration, some are expecting the labor shortage to become more pronounced. The reality is that no matter what happens with these tariffs, manufacturing companies still need a labor solution, so some might feel nearshoring is their best bet.
How should companies respond?
Given all this uncertainty, what’s the smartest path forward for businesses considering nearshoring? My advice is simple: Do the homework.
1. Run the numbers.
Businesses that once had the luxury of being somewhat relaxed about cost structures can no longer afford to be. If you’re considering nearshoring, conduct a deep financial analysis. Assume the worst-case scenario—a 25% tariff on the total declared value of your product—and determine whether your margins can still hold up.
2. Prepare for different outcomes.
In early February, some said they believe that 25% tariffs on Mexican goods are unlikely to last. Regardless of whether any do, in the short term, we may see temporary disruptions. If you can survive a few months of uncertainty, then pressing forward with nearshoring may still be a viable long-term strategy.
3. Consider the alternatives.
If the math doesn’t work with a 25% tariff, you may need to explore other options. That could mean delaying your move to Mexico, considering automation investments or looking at alternative manufacturing locations. However, bear in mind that tariffs and trade restrictions will impact businesses everywhere, not just in Mexico.
Final Thoughts
Despite all the noise and political maneuvering, one thing remains clear: Nearshoring can still be a valid long-term solution for North American companies facing labor shortages and supply chain challenges. Even with short-term uncertainty, the fundamentals haven’t changed. Brands will need to take the long view and ensure the benefits of nearshoring outweigh the risks.
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