Mexico may offer fix for some U.S. exporters in Trump bind
By Dave Graham
MEXICALI, Mexico Aug 2 (Reuters) - For Allied Tool & Die Company, Donald Trump's threats to tear up trade deals and impose steep tariffs if he becomes the next U.S. president means considering doubling down on Mexico as a base to manufacture for foreign markets.
The Phoenix-based aerospace supplier, and a small but rising number of U.S. companies with plants in Mexican industrial hubs like the border city of Mexicali, say they may have to increase their capacity in the country's lower cost base to sell goods abroad if the Republican nominee wins the White House.
"What would I do if a giant wall of tariffs were erected in front of me?" said Allied Tool Chief Executive Officer Bill Jordan. "Rather than having the parts travel through the United States to somewhere else, I would create a Mexican company to sell directly to other international companies. We just wouldn't go through the United States," he said of his non-U.S. clients.
So far, Trump's campaign pledges - such as threatening to roll out punitive tariffs, ditch the 1994 North American Free Trade Agreement (NAFTA) and wall off Mexico from the United States - have flummoxed constituents ranging from traders on Wall Street to economists and politicians.
While his rival Hillary Clinton has said she may want to rework elements of trade deals as president, she has not called for tariffs.
The initial strategic planning by Allied Tool and others with operations in Mexico is one of the first signs of how business are preparing for the possibility of a President Trump.
Driven by a desire to simplify supply chains ahead of what would be an era of uncertainty in cross-border commerce, expansion in Mexico would also move in lock-step with recent capital flows across the Pacific drawn by Mexico's rising cost advantage over China.
"The trend of considering Mexico as a place to build export platforms to countries other than the United States has accelerated," said Emilio Cadena, CEO of Grupo Prodensa, a firm that specializes in helping foreign companies move to Mexico. Continuación...