Chinese companies masquerade as Mexican brands to bypass US tariffs

Furniture from the Man Wah Furniture factory in Monterrey have labels stating that they were 100% made in Mexico. They make their way to large American retail chains like Costco and Walmart.

However, as the British BBC reported, these are Chinese furniture manufactured in a Chinese factory built on Mexican soil.

Man Wah is one of several Chinese companies that have moved to industrial parks in northern Mexico in recent years to bring production closer to the American market.

Besides saving on transport, their final products are considered completely Mexican. This means Chinese firms can avoid American tariffs and sanctions imposed on Chinese goods due to the ongoing trade dispute between the two countries.

Thanks to Chinese investments in Mexico, the country's economy is thriving. By June of last year, Mexico's total exports increased by 5.8% compared to the previous year, reaching about £41 million.

In just two months of this year, capital investments announced in Mexico have almost reached half of the total annual figure for 2020.

The Man Wah furniture factory is situated in the Hofusan Chinese-Mexican industrial park. Demand for plots in this area is overwhelming: every available space has already been sold.

The Association of Industrial Parks in Mexico states that all the lands to be developed by 2027 have already been purchased.

Many Mexican economists believe that China's interest in Mexico is not temporary. "The structural reasons that are bringing capital to Mexico are here to stay," says Juan Carlos Baker Pineda, former deputy minister of foreign trade in Mexico, in a discussion with the BBC. He adds, "I have no indication that the trade war between China and the US is going to diminish any time soon."

Baker Pineda was part of the Mexican team negotiating the new North American free trade agreement, USMCA.

"While the Chinese origin of the capital coming into Mexico may be uncomfortable for the policies of some countries," says Pineda, "according to international trade legislation, those products are, to all intents and purposes, Mexican."

Pineda highlights that this situation has provided Mexico with a strategic advantage between two global powerhouses. Mexico has recently overtaken China as the main trading partner of the USA.