With less than 100 days in office, President Trump’s administrative agenda has created concern among international companies. Many businesses that had planned investments in Mexico have put those plans on hold or dropped them entirely.
Despite the uncertainty in U.S. – Mexico trade relations, many Japanese-owned companies have continued to invest in Mexico — specifically Japanese companies operating in the automotive sector. This increase in automotive investment in Mexico is part of a broader trend for Japanese OEMs and their suppliers to near-shore their operations to the markets in which they’re selling their products, namely the United States, Mexico, and Central and South America. In January 2017, the number of Japanese companies that have invested in Mexico reached 1,000, compared to just 399 in 2009.
According to the Nikkei Business News, some Japanese companies that have continued to invest in Mexico are taking an opportunistic view of the uncertainties in North American trade relations. For example, while Ford Motor Company made the decision to cancel its planned investment in Mexico, which was devastating for some automotive suppliers, other suppliers viewed the decision positively. The Ford investment in Mexico would have significantly diluted local skilled labor pools, which would have left a shortage of both skilled labor and administrative workforces for companies currently operating in Mexico.
Although plenty of uncertainties still exist in U.S-Mexican trade relations, it’s important for businesses —both based in the United States as well as abroad — to identify potential market risks and adapt their operating and investment strategies to cope with those risks. Avoid making drastic short-term decisions, which could hurt long-term growth.