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Uncertainty around USMCA could curb Mexico’s new investment inflows

Societe Generale says Mexico’s existing auto manufacturing capacity looks more defensible than new investment, with policy certainty pushing new assembly and supplier activity toward the United States.

Reported · Written up by our desk · Central Banks

Societe Generale’s Dev Ashish argues that Mexico may find some opportunity from growing tensions between the United States and Canada, but uncertainty around the USMCA framework could limit the upside for fresh investment.

The bank notes that Mexico’s lower-cost manufacturing base may help protect current production, because it cannot be replicated quickly in the US without materially raising vehicle costs.

Ashish also says automakers could respond by keeping existing Mexican plants while moving new assembly lines, battery facilities, and supplier capacity to the US to reduce policy risk, leaving Mexico able to preserve output but potentially losing long-term expansion investment.

The report concludes that Mexico will likely need closer alignment with US supply-chain priorities to secure a more predictable investment environment, adding that Mexico is not a straightforward substitute for Canada.

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