Global Trade
6 May 2025
Mexico invests in port capacity despite U.S. tariff troubles
Written by Greg Wittbecker
Mexico is moving ahead with plans to expand its Pacific port of Manzanillo despite some seemingly big headwinds.
The Mexican government aims to transform Manzanillo on Mexico’s Pacific into the largest seaport in Latin America, capable of processing some 10 million TEU (twenty-foot equivalent units) per year by 2030. The port currently handles about 4 million TEU/year and is the 3rd largest port in Latin America,
It is already Mexico’s largest port and the third largest in Latin America, handling nearly 4 million 20-foot containers in 2024.
Plans are for $2.4 billion in private capital to be joined by $741 million in public capital to achieve this growth.
Is Mexico “Reading the Room” Correctly?”
Major infrastructure investments such as what Manzanillo is doing have to take a “long view.” However, there are certainly some things near-term and mid-term that should be prompting some careful examination of their structural assumptions about this investment.
Recent statements from Manzanillo beg the question as to whether officials are doing this.
According to Julieta Juarez Ochoa, the port’s commercialization manager, the majority of imports arriving at Manzanillo come from Asia and are largely used in domestic manufacturing. “We don’t see any real impact (of the U.S. tariffs), and we don’t foresee a significant impact,” she said.
Really? This statement seems a bit out of touch with the reality of the Trump Administrations’ 25% IEEPA tariffs now being applied to Mexico. Granted, by 2030, Trump may be a distant memory, but successive political regimes in the U.S. may or may not reverse course on these tariffs.
Mexico’s exports to the U.S. were over $500 billion in 2024. Much of this was accomplished through its highly successful IMMEX (maquiladora) industrial incentive programs.
Mexico is an industrial powerhouse in autos, HVAC, appliances, and medical devices to name just a few key sectors that are geared to open trade with the U.S.
The Trump Administration has taken dead aim at Mexico with the threatened IEEPA duties plus the 25% import duties on autos.
Exemptions to these duties are contingent on being USMCA-compliant. This means US, Mexican or Canadian origin components going into manufactured goods in trade between the countries……there is the rub.
Mexico touts the fact that its Manzanillo port volumes are “from Asia.” Read between the lines please……China contributed nearly $130 billion of Mexico’s total $625 billion in imports in 2024. Those imports found their way into a great deal of manufactured goods coming to the U.S. The IEEPA duties would put a huge crimp in those flows unless the maquiladora industries simply chose to pay the 25% duties and charge them back to the U.S. buyers. That is a shaky assumption.
Instead, the maquiladoras are likely to rotate more sourcing to the U.S. and Canada to support the installed industrial base. That could directly impact the import volumes at Manzanillo.
USMCA is up for renegotiation in 2026
The Trump Administration says the existing USMCA deal is “ok for now” (stay tuned for that statement to change at any point in time). In July 2026, USMCA is up for formal renewal. It is a safe bet that the Trump Administration will be looking for a much better deal for the U.S., with a focus on bringing more manufacturing back to the U.S. That will not bode well for the IMMEX program in Mexico. Once again, how does Manzanilla cope with that?
Can Mexico compensate for lower U.S. exports?
The International Monetary Fund (IMF) recently forecast the Mexican economy to shrink -0.3% in 2025 and a tepid 1.4% growth rate in 2026. Mexico is highly dependent on exports to drive its economy. While exports to adjacent Central America can help, and rising middle class can help domestic demand, Mexico and the U.S. need to cooperate.
The expansion of Manzanillo seems like a good long-term investment for Mexico to feed its large industrial base, but the expansion may also be viewed as a threat by the Trump Administration. The Administration has already made it very clear about its concerns about China and the Panama Canal. There are undoubtedly some in the Administration who are watching these developments in Manzanillo as another effort by China to expand it influence in Latin America and perpetuate the flow of Chinese goods into Mexico and onward to the US. We won’t even get into the implications about the drug trade…. You know the story.
On the surface, one can applaud Mexico for investing in its ports…something the U.S. ought to be doing. However, Mexico also needs to solidify its trade relations with the U.S. before assumption that it can that a 300% increase in Manzanillo port capacity is going to be smooth sailing.
