The New York Times reports:

Like much of the Mexican business world, Daniel Córdova finds himself grappling with an enormous variable looming across the American border: the imminent return of Donald J. Trump to the White House.

Mr. Córdova oversees a factory outside the city of Monterrey that makes heating and air-conditioning units for Trane, an American company. The last time Mr. Trump was president, he unleashed a trade war against China that proved beneficial to Mexican industry. Companies that relied on Chinese factories to make goods for the American market shifted production to plants in Mexico to avoid Mr. Trump’s tariffs.

That trend, known as “nearshoring,” gained momentum as President Biden extended tariffs on Chinese imports. Soaring shipping prices during the pandemic heightened the pitfalls of relying on factories across oceans. For companies seeking to close the distance between plants in Asia and customers in the United States, Mexico beckoned as an attractive place to manufacture their wares.

Then last month, President-elect Trump threatened the economics of nearshoring by promising to impose 25 percent tariffs on all goods entering the United States from Mexico and Canada. Mexican industry was confronted with a high-stakes question: Was Mr. Trump bluffing, hoping the threat would pressure the Mexican government to halt the movement of people and drugs toward the border? Or was he really preparing to put tariffs on Mexican imports to force companies to move production to the United States?

Hanging in the balance is the pace of investment and job growth in Mexico, along with the availability of a vast profusion of imported goods in the United States — from fresh fruits and vegetables to auto parts.

At the Trane factory in the industrial enclave of Apodaca, Mr. Córdova is getting ready. If the tariffs materialize, the company could shift orders to its American factories. Yet he remains optimistic that the status quo will prevail, because the Mexican and American economies depend on each other for parts and raw materials for their own finished products. Though Mr. Trump is known to be unpredictable, Mr. Córdova cannot imagine him impeding the movement of products across the border — a course that economists warn would raise prices for American consumers and slow economic growth.

“We are together in this adventure, the United States and Mexico,” Mr. Córdova said, as machines on his factory floor pounded hunks of metal into parts for heating units that would be assembled in Tennessee. “We need each other. A divorce is never cheap.” [Continue reading…]