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US-China trade war
OpinionComment
Charlie Grahn
Charlie Grahn

Opinion | US-China trade war: migration to Mexico, Central America show firms adapting to new global business landscape

  • As geopolitical tensions rise and economies become more complex, North American industries are turning away from Asia to secure a better future
  • Mexico and Central America offer significant benefits for firms looking to keep costs low and mitigate risks stemming from the US-China trade war

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Employees work at a wire harness and cable assembly manufacturing company that exports to the US, in Ciudad Juarez, Mexico. In the near term, Mexico can expect sectors where there is already a substantial footprint – such as computer assembly and motor vehicle parts – to bolster that presence. Photo: Reuters
Charlie Grahn

John Steinbeck’s 1939 novel The Grapes of Wrath portrays the struggles of tenant farmers from Oklahoma during the Great Depression. These people, driven from their land by drought, embark on a journey to California in search of a better life.

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Much like the migration documented by Steinbeck, another narrative is unfolding in the currents of globalisation and economic realignment. In this evolving landscape, Mexico and Central America are poised to leverage advantages once deemed unfavourable compared to many parts of Asia.

There are many factors at play. What professionals call the “extended supply chain” found its roots in advancements in information technology, material handling capabilities and a managerial ethos that believes “lean” manufacturing can unlock unparalleled competitiveness.
For more than four decades, North American companies embraced these principles, having ventured to distant shores – especially Asia – for cost savings, market expansion and improved brand reputation, reaping substantial profits. Beneath these foundational conditions lie additional factors that also play a role: sustained growth at home, lower costs abroad, a stable international trading system and a degree of cooperation among state rivals.
While the internet and containerisation have solidified their place in commerce, recent challenges have highlighted the fragility of supply chains, especially those stretched across oceans. The disruptive impact of the Covid-19 pandemic, inconsistent government response, port congestion, shipping delays and increasing costs have heightened interest in their vulnerability.

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Factory to shelf: How Covid-19 complicates the China-US journey of just one video game controller

Factory to shelf: How Covid-19 complicates the China-US journey of just one video game controller

The disruptions thus far have been more of a nuisance. The problem is that it’s hard to put it out of mind once one is alerted to the danger. Every news story further solidifies this concern and the rationale for action becomes more compelling. Entrepreneurs swoop in to take advantage of the situation.

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