Mexico: Alignment for certainty in USMCA – Societe Generale
Societe Generale’s Dev Ashish argues that Mexico could benefit from tensions between the US and Canada, but warns that uncertainty around USMCA may limit the upside.
Societe Generale’s Dev Ashish suggests Mexico could gain from US-Canada tensions, but cautions uncertainty around USMCA may limit gains. Mexico’s cheaper manufacturing base should safeguard current production, while new investment may favor the US due to increased policy certainty. The report concludes Mexico must align closely with US supply-chain priorities for a more predictable investment environment.
USMCA negotiations have transitioned into two bilateral tracks: US-Mexico and US-Canada. Some Canadian factories may shift to Mexico, but the dispute also weakens USMCA’s credibility as a reliable framework for long-term investment. Existing facilities have more staying power than new ones. Mexico’s cheaper manufacturing base is harder to replicate in the US without significantly increasing vehicle costs, making current Mexican production relatively resilient.
However, automakers could maintain current plants while establishing new assembly lines, battery facilities, and supplier capacity in the US to mitigate policy risk. Mexico might maintain output while sacrificing the investment needed for long-term expansion. Mexico must balance alignment for certainty. Mexico is not Canada’s clear substitute.
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