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With street signs in both Chinese and Spanish and the flag of the People’s Republic flying high alongside that of Mexico, this is one of many “industrial Chinatowns” that have been created in recent years around Monterrey, turning farmland to factories and boosting the local and national economies.
Much of the growth owes to the phenomenon of “nearshoring” — Chinese companies moving production to Mexico to have tariff-free access to the US market under the USMCA trade deal. President-elect Donald Trump negotiated that deal with Mexico and Canada in his first administration but is now threatening tariffs on Mexico and other countries and an “External Revenue Service” to collect dues. With days until the beginning of Trump’s second term, these companies and their Mexican hosts are now planning their options if the trade restrictions come.
Matt Harrison, president of Kuka Home North America, which has a furniture manufacturing base in Monterrey, fears the future could be bleak.
“Simply put, 25% tariff on Mexico puts me out of business,” Harrison said, “We’re waiting to see what happens when Trump moves into office — if we can continue to grow or not.”
But César Santos, who has welcomed much Chinese investment on his land, still sees good business ahead.
“Even with a 25% tariff on Mexican goods, many companies believe it’s still a better option than manufacturing in China,” he told CNN.
From horses to housewares
Santos remembers riding horses up to his family home; for generations, this was a ranch belonging to his forebears.
The old farmhouse still stands but construction is all around — for factories, housing and a hotel.
Santos and his family began developing their 1,500 acres of land in 2013, initially partnering with Chinese shareholders looking to build factories closer to their US customers, Santos said. Trump’s imposition of tariffs on Chinese-made goods entering the US starting in 2018 — which President Joe Biden largely kept and expanded — supercharged the dynamics.
“Actually, that helped us. When they put a tariff there (on) China, then those companies came to us,” Santos said. Firms started with temporary leases but quickly transitioned to purchasing full facilities as other factors came into play, he added.
“From here, we are 160 miles from Texas. So, in 24 hours, 44 hours, the products are in the US from here. This logistics is very important, it is good for them,” Santos said of the incoming manufacturers.
Santos launched a partnership with two Chinese entities to build and manage Hofusan in 2015, creating the industrial park that now has deals to host 40 Chinese companies. The factories already up and running and those set to come online produce everything from electronics to furniture to car parts — all destined for the US.
He and many others have benefited from soaring Chinese investment in Mexico, which has risen from just $5.5 million in 2013 to $570 million in 2022. The first six months of 2024 — the latest period for which figures are available — showed $235 million coming to Mexico from China in direct investment, according to government statistics.
And Santos is staying bullish on the future for companies starting production in Mexico, even if Trump does impose levies on goods as punishment for what the President-elect says is a failure to stop undocumented migrants heading north into the US.
Looking for security against any growth of cartel power as well as to protect his profit, Santos has donated land for Fuerza Civil, the state police, to build a station adjacent to his industrial Chinatown.
He said he likes the incoming US president and admires Trump’s strength and character.
“For all the issues we have in terms of all the criminal gangs and everything like that, the drugs … we need the help of people like him to stop that.”
Combining cultures
Both Mexicans and Chinese are forging new relationships as they try to keep the boom going.
Developer Ramiro González has traveled to China and has his nickname of “Da Long” or “Big Dragon” stitched in Chinese characters on his vest.
The Chinese culture is that they appreciate time. So, they expect to be fast in everything. So here in Mexico, we have to try to get a better construction process and design process to be faster,” he said.
Earthmovers and building equipment beeped around him as he showed plans for his latest development — another industrial park but this one a little outside Monterrey as he said there had already been so much building there.
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Monterrey
There are, of course, cultural hiccups especially for the incoming workers. Zhang Jianqiu, an engineer who provides services for robotics equipment in new factories, acknowledged he was homesick living halfway across the world from his family. He said he and his housemates had to source their preferred type of electric kettles to boil water for the Chinese tea that is brought in by every returning countryman.
But once he started exploring the local culture and cuisine and learning Spanish, he became more settled, said the man known as Lupe to his Mexican friends.
Now acting as a bridge between Chinese companies and the welcoming Mexican communities they invest in, Zhang has a clear view of what tariffs could mean for growth.
“Most Chinese companies are still waiting and watching,” he explained, ”and then they will make a final decision.”
It’s complicated, he said, but also nothing new.
“For Chinese companies, if they want to go global, they have to face different challenges from different countries, not only about tariffs, but also about the policies and regulations of the local country,” he said. “But business is business, politics is politics.”
And despite the tariff threat, Zhang, like the Mexican workers we talked to, said he looked to Trump as a successful businessman who would likely do what makes sense financially and not do anything to hurt the American economy. Economists and CEOs say it’s American consumers that will pay for tariffs as companies pass on the costs through increased prices. And while tariffs on imports could in theory boost domestic manufacturing by making its costs more competitive, there are other factors like consumer demand and interest rates that may make any increased business harder to obtain.
