Preemptive Measures: businesses Relocate Amid Tariff Concerns

In response to the looming threat of a 25 percent tariff implementation on exports from Mexico to the United States, businesses in Ciudad Juárez have begun to proactively shift their operations. This includes relocating inventories, streamlining logistics, and moving packaging processes across the border to El Paso, Texas.

Uncertainty Fuels strategic shifts

Héctor Núñez Polanco, president of the juarez Business Coordinating Council, attributes this trend to the uncertainty surrounding potential tariff policies. While acknowledging the situation, Núñez Polanco emphasized that these actions represent proactive forecasts made by companies, particularly those in the manufacturing sector, rather than a state of panic.

This situation is a consequence of the uncertainty generated by potential tariff policies.
Héctor Núñez Polanco, Juarez Business Coordinating Council

Which Companies are Moving and Why?

According to data from the Association of Maquiladoras AC (Index Ciudad Juárez), a significant number of companies have already transferred portions of their operations to El Paso. These companies primarily operate within the automotive and electronic sectors, as confirmed by María Teresa Delgado Zarate, head of Index Ciudad Juárez.

This strategic relocation is largely driven by the “Just in Time” (JIT) manufacturing model prevalent in the export industry. JIT relies on timely delivery,and failure to meet deadlines can result in considerable fines and economic sanctions. The potential for tariffs disrupts this delicate balance, prompting companies to seek alternative solutions.

companies are still installed in Juárez Ciudad but they already took to El Paso, Texas, several of their processes.
María Teresa Delgado Zarate, head of Index Ciudad Juárez

Specific Processes Being Relocated

While companies maintain their presence in Juárez Ciudad, they are strategically moving specific processes to El Paso. These include logistics, packaging, and the storage of raw material inventories. The goal is to mitigate the potential impact of tariffs on these critical aspects of the supply chain.

Núñez Polanco clarified that these relocations are not expected to negatively impact job creation in Juárez, as the affected processes do not directly involve the core production lines in Juárez. The movement primarily involves raw materials, some unprocessed and some finished, that were previously held in inventory on the Mexican side of the frontera.

Government Response and Future Outlook

The potential Trump tariffs on the automotive sector have heightened anxieties among export businesses. The proposed tariff, initially set at 2.5 percent, is slated to increase to 25 percent on cars manufactured in Mexico.

The Mexican government, under the leadership of President Claudia Sheinbaum, is actively addressing the situation. Secretary of Economy, Marcelo Ebrard, has engaged in discussions with US officials to negotiate potential exemptions or reductions in tariffs. Key points of negotiation include:

• Discounts for vehicles made in Mexico with increased US-made components.
• Exemptions for auto parts manufactured in Mexico.
• Clarification on tariff submission for manufacturers operating in Mexico.

President Sheinbaum has pledged a complete response, emphasizing the need to defend domestic jobs and uphold national sovereignty. She also stressed that the application of tariffs within the framework of the T-MEC (formerly NAFTA) is unwarranted.

we have to defend the jobs that are generated in our country and work on the Relationship with the United States Government and always with the principle of defense of the sovereignty of our country. Of course within the T-MEC There should be no application of tariffs.
President Claudia Sheinbaum