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Mexico under scan as potential CoO loophole for Chinese goods: QIMA

31 Jan '25

2 min read

Mexico under scan as potential CoO loophole for Chinese goods: QIMA

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Mexico's expanding trade with China, as seen by a 64-per cent YoY rise in inspection and audit demand in 2024, along with the growth of nearshoring projects, has raised doubts as to whether Chinese businesses are increasingly using Mexico as a proxy to bypass US tariffs, QIMA said.
Nearshoring has been growing slowly in the West, and 'multi-shoring' and the use of regional supply hubs are growing.

Mexico’s rapidly expanding trade with China, evidenced by a 64-per cent year-on-year (YoY) increase in inspection and audit demand in 2024, along with the growth of nearshoring projects, has raised questions as to whether Chinese businesses are increasingly using Mexico as a proxy to bypass existing US tariffs on goods made in China, according to QIMA.

Data collected last year by the testing, inspection, certification and compliance company shows US demand for inspections and audits in Mexico has been growing at a fraction of the pace of Mexican businesses’ demand for China inspections and audits.

This suggests that, at least for fast-moving consumer goods, the lion’s share of Mexico’s current sourcing from China is likely intended for its domestic market.

“And while relocating final product assembly closer to the US market may be attractive for Chinese exporters at the moment, they will have to carefully weigh their options in the light of the potential higher US tariffs against both China and Mexico (as well as revision of the United States-Mexico-Canada trade agreement slated for 2026),” QIMA noted in a release.

After contributing to Mexico’s crowning as the largest US trading partner in 2023, US nearshoring in Mexico may now be at risk due to tariff threats from the Donald Trump administration.

However, QIMA data indicates that US-based brands and retailers are actively exploring other sourcing partnerships across Latin and South America, including in Guatemala, Peru, Brazil, and the Dominican Republic, where US demand for inspections and audits has grown by 20 per cent YoY in 2024.

Such diversification of supplier portfolios is likely to make US nearshoring projects less vulnerable to tariff tensions with Mexico, QIMA observed.

Overall, aggregated QIMA data on inspection and audit demand also suggests that nearshoring has only been growing slowly in the West.

After initially redirecting some sourcing volumes closer to home, both US-based and European Union--based buyers now seem to favour diversifying their overseas procurement further, without significantly increasing the share of nearshoring in their sourcing portfolios.

This limited incorporation of local sourcing suggests a growing trend towards ‘multi-shoring’ and the use of regional supply hubs as part of brands’ strategies for risk mitigation and enhanced supply chain flexibility, QIMA added.

Fibre2Fashion News Desk (DS)