Nearshoring

China Supply Chain Risk: What USMCA Means Now

The central issue in the USMCA review is not wages, migration, or energy — although all of them appear in the conversation. The issue dominating the technical agenda is China.

For companies manufacturing in Mexico or evaluating manufacturing in Mexico, this should not be read as an immediate alarm. It should be read as a signal to prepare.

The implications for manufacturers using Asian components are more concrete — and less dramatic — than many headlines suggest.

Why China Is at the Center of the USMCA Review

The U.S. concern is clear: preventing products made primarily in China from entering the U.S. market through Mexico while benefiting from USMCA preferences.

But the reality is more complex.

Jorge González Henrichsen, co-CEO of The Nearshore Company, explained it clearly in FreightWaves: the narrative that China is using Mexico as a backdoor into the U.S. market is “both accurate and oversimplified.”

That distinction matters. Not every Chinese investment in Mexico represents tariff evasion. Some operations involve real manufacturing, local employment, meaningful production processes, and genuine value added within North America. Others may involve more superficial structures designed mainly to reroute trade without substantial transformation.

The USMCA review is about distinguishing between the two.

Chinese Investment in Mexico: A More Nuanced Reality

Chinese foreign direct investment in Mexico has grown significantly since 2017. Official data shows approximately $2.3 billion in net FDI between 2017 and 2024, although private estimates suggest the actual figure could be several times higher.

This growth reflects several factors:

• Chinese companies seeking proximity to the U.S. market.
• U.S. customers reducing direct exposure to China.
• Tariff pressure on Asian imports.
• Demand for shorter and more flexible supply chains.
• Interest in Mexico’s industrial infrastructure.

For companies considering nearshoring in Mexico, the question is not whether China is present. The question is how that presence fits into an operation that complies with USMCA rules.

USMCA Already Has Tools to Separate Real Manufacturing From Evasion

USMCA benefits are not granted automatically just because a product passes through Mexico.

To qualify for preferential treatment, a product must comply with USMCA rules of origin. That means there must be real transformation within North America — not just packaging, relabeling, or minimal assembly.

In practical terms, rules of origin evaluate whether the product meets criteria such as:

• Tariff classification shift.
• Regional value content.
• Substantial production processes.
• Supplier documentation.
• Traceability of input origin.

That is why using Chinese components is not automatically a problem. The issue arises when the final product does not meet the transformation or regional content requirements needed to qualify under the agreement.

What Could Change Under the USMCA Review

The focus on China could translate into more specific changes within USMCA, especially in strategic sectors or industries with high dependence on Asian components.

Potential changes may include:

• Higher regional content thresholds.
• Sector-specific restrictions on Chinese-origin components.
• Stronger enforcement and origin audits.
• Tighter review of origin certifications.
• Trilateral coordination mechanisms to limit Chinese investment in sensitive sectors.
• Greater pressure on companies performing only superficial assembly in Mexico.

This does not mean manufacturing in Mexico becomes less attractive. On the contrary: well-structured operations will have a clearer advantage over those that cannot demonstrate compliance.

What This Means for Your Supply Chain

If your company uses Chinese-origin components, the question should not be: “Are we automatically at risk?”

The right question is: “Does our operation comply with current rules of origin, and could it continue to comply if standards become stricter?”

To answer that, manufacturers need to review:

• Which inputs come from China or other Asian countries.
• What percentage of product value is generated in North America.
• What transformation actually occurs in Mexico.
• What documentation supports the origin of each component.
• Whether regional suppliers are available.
• How prepared the operation is for an origin audit.

This analysis should happen before any new rules or enforcement standards take effect.

Sectors With Higher Exposure

Although this issue affects multiple industries, some sectors may face greater scrutiny because of their dependence on Asian components or their strategic relevance.

Automotive

The automotive sector already operates under stricter rules of origin than many other industries. Pressure could increase around critical components, auto parts, batteries, electronics, and Tier 1, Tier 2, and Tier 3 suppliers.

Electronics and Advanced Manufacturing

Companies relying on semiconductors, circuits, electronic boards, sensors, or specialized Asian components will need to review their regional content structure more carefully.

Industrial Equipment and Machinery

When major components come from Asia and the process in Mexico is limited, companies may face a higher risk of review under stricter rules of origin.

Medical Devices

Traceability, documentation, and regulatory compliance are already critical in this sector. If relevant Asian inputs are part of the product, origin analysis becomes even more important.

TNC’s Recommendation: Design Compliance From the Start

At The Nearshore Company, we design manufacturing operations that are USMCA-compliant from the start.

That means evaluating which inputs qualify, which require additional documentation, which processes create real value in Mexico, and how to structure an operation that can withstand audits, reviews, or future changes to the agreement.

The goal is not simply to move production to Mexico. The goal is to build a strong, traceable North American operation prepared to compete under the real rules of USMCA.

Is Your Supply Chain Exposed?

The USMCA review does not eliminate the opportunity to manufacture in Mexico. But it does raise the importance of understanding exactly how your supply chain is structured.

If your operation uses Asian components, now is the time to analyze your exposure, review rules of origin, and prepare a compliance strategy.

Request a USMCA exposure analysis with our team. We can help you understand your exact supply chain position and the actions needed to reduce operational risk.