The U.S. isn’t the only country that has China in its crosshairs.

Mexico has imposed a series of sweeping tariffs on goods from China and other Asian countries with which it doesn’t have a free trade deal. The levies, which were first announced on December 11 and took effect at the beginning of the year, raise most tariffs up to 35% and include 1,400 products. Several of those are widely used across promo – including textiles, plastics, steel, aluminum and paper.

For promo companies, the announcement reflects tightened restrictions on Mexico as a “back door” for companies looking to avoid steep levies by sourcing materials from China and then assembling them south of the American border.

“For years, firms believed they could mitigate the risk of U.S.-China trade tensions by shipping Chinese-made parts through Mexico,” says Thomas Fighter, an attorney and founder of Florida-based law firm Fighter Law. “Legally and on policy perspective, Mexico’s decision to impose tariffs on select products from China indicates increased scrutiny of nearshoring strategies that used Mexico as an indirect route to the U.S. market.”

Manufacturing in Mexico: A Recent History

Over the last few years, Mexico has become a popular destination for promo sourcing. According to the 2025 Counselor State of the Industry report, 16% of U.S. suppliers sourced goods from Mexico, making it the third most popular sourcing region after Vietnam and China. The year prior, that figure was 13%, illustrating that suppliers have a growing interest in sourcing more products south of the border.

To understand the root of the U.S.’s reliance on Mexico for sourcing and manufacturing, simply look at a few key trade deals between the two bordering countries.

In 1965, Mexico launched the Border Industrialization Program (BIP). The initiative aimed to attract foreign investment and add jobs after the Bracero Program – a post-WWII era agreement that brought millions of temporary Mexican workers, or “braceros,” to the U.S. – was dismantled. BIP also introduced maquiladora factories – facilities close to the U.S.-Mexico border that allow American companies to assemble products in Mexico and transport them back stateside.

Nearly 30 years later, the North American Free Trade Agreement (NAFTA) was introduced, establishing a free trade zone between the U.S., Mexico and Canada, and eliminating or reducing most tariffs and other barriers to trade between the three nations. In July of 2020, the United States-Mexico-Canada Agreement (USMCA) replaced NAFTA, with various provisions and amendments including increased labor protections and digital trade considerations that the first iteration of the agreement did not address.

A Looming Decision

Here’s where things get complicated: In six months, the three countries will complete a joint review of USMCA. They’ll determine whether to extend the pact for 16 years as is, revise the agreement or let it expire. As part of the joint review, the early stages of which began in September when the U.S. Trade Representative (USTR) announced a request for public comment, key decision-makers will consider new measures to limit benefits of the trade deal for Chinese companies or products, and stricter rules of origin for goods originating in China and other Asian nations.

Jamieson Greer, head of the White House’s Office of the USTR, confirmed that the office received more than 1,500 comments from a “wide range” of organizations and stakeholders. In a statement delivered to the Senate Finance Committee and the House Ways and Means Committee in December, he cited rules of origin and economic security as critical concerns from manufacturing trade organizations. The Alliance for American Manufacturing, for example, expressed fears about foreign firms using Mexico as “a staging ground to evade U.S. tariffs, circumvent trade enforcement measures and exploit gaps in the Agreement’s rules of origin,” Greer explained. The Specialty Steel Industry of North America also recommended enacting stricter rules of origin.

“Legally and on policy perspective, Mexico’s decision to impose tariffs on select products from China indicates increased scrutiny of nearshoring strategies that used Mexico as an indirect route to the U.S. market.”Thomas Fighter, Fighter Law

The USTR, for its part, confirmed it would not rubber-stamp the agreement as it currently stands.

“USTR will keep the president’s options open, negotiating firmly to resolve the issues identified, but only recommending renewal if resolution can be achieved,” Greer said in his statement.

Mexico’s decision to enact tariffs on China is yet another regulatory push to protect its position and remain competitive in the game of global trade.

According to Fighter, the new tariffs indicate that Mexican regulators are “finally reacting to the pressure they face to more closely harmonize their trade rules with those of the region” and to ensure that manufacturing work in Mexico actually adds value rather than just assisting Chinese goods in passing through the region.

The Mexico Work-Around

Nearshoring, or relocating manufacturing to a nearby country, has become an increasingly popular strategy for suppliers doing business in the “tariff era,” especially as the trade war between the U.S. and China continues to escalate.

“China will still be an important center for promo manufacturing, but probably not the primary one anymore,” Jing Rong, vice president of supply chain and sustainability at HPG (asi/61966), told ASI Media last year. “With our industry’s strong focus on low-cost goods, the rising tariffs create a serious challenge. That kind of price pressure is pushing companies to look elsewhere than China for more affordable options.”

An added benefit to promotional products sourcing from Mexico? Shipping times and costs. Scott Edidin, co-founder of 6AM Sourcing (asi/46173), an exports and logistics company, noted in 2024 that Mexico is a nearshoring opportunity. He’s been able to successfully fulfill rush jobs for clients by sourcing raw materials from Asia, then bringing them to Mexico for cutting, sewing and other finishing work.

Nearshoring might also streamline the communication process for suppliers because U.S. time zones are more closely aligned with Mexico than they are with China. If there’s a last-minute change to an order or request, suppliers may be able to reach someone in Mexico more quickly than they would in China or Vietnam, for example.

Risky Business

Now, with the new tariffs on China, 6AM Sourcing has felt a significant impact to its business in Mexico.

“As a company that sources, develops, and trades globally, we see the effects most clearly in textiles, which represent some of the highest-volume product categories produced in Mexico – such as apparel, uniforms, bags and headwear,” says Scott Pearson, co-founder at 6AM.

He added that while Mexico is a strong producer of domestic textiles and basic commodities like cottons, polyesters and standard materials, projects that require technical fabrics, premium materials, low-price commodity materials or unique components often must be imported.

The new tariffs have introduced higher costs and reduced availability, Pearson explains. “This has limited material options and increased pricing on many product requests,” he notes.

Still, Pearson and Edidin continue to see enough benefits of manufacturing in Mexico to continue operations there.

“Domestic materials and large-scale production remain a strong fit for Mexico,” Pearson says. “For example, we continue to successfully produce glassware for major Las Vegas resort casinos, where reorders and mass production runs benefit from Mexico’s manufacturing capabilities, materials and infrastructure.”

For Eric Turney, president of The Monterey Company, Inc. (asi/275832), a distributor and custom apparel supplier based in Bend, OR, Mexico’s tariffs on China make the “Mexico as a back door” play riskier and often more expensive going into 2026.

“For promotional products companies, any nearshoring plan that still relies heavily on finished Chinese goods or major Chinese components can be hit twice: higher landed costs in Mexico, plus tighter scrutiny of origin and value-add when shipping onward,” says Turney, who currently sources most of his products from China, and some from Vietnam and Bangladesh.

But for those looking to take advantage of the benefits of Mexican manufacturing, Turney recommends a path toward what he calls “true nearshoring.”

“Build more content and assembly in Mexico,” he says, “document the [bill of materials] and origin cleanly and diversify inputs so your plan still works if tariff lines expand or enforcement tightens.”