President-elect Trump’s interest in tariffs has raised a question of whether it might affect commercial real estate construction. But that would seem of secondary importance when you consider that a main target is Mexico and the amount of trade between the U.S. and its largest trading partner.
Companies involved in critical nearshoring near the U.S. southern border say they haven’t spent all that time, money, and attention to walking away.
U.S. freight broker C.H. Robinson Worldwide has more than 1.5 million square feet of cross-dock and warehousing space along the border, as the company’s president of North American surface transportation Michael Castagnetto explained at a recent investors’ day.
“And we are super proud of the teams in both Mexico and Canada for all the work they do for us,” he said. “We also recently announced our next generation of logistics management through C.H. Robinson managed solutions. Through this offering, we're meeting customers where and how they want to buy, tailored customer-centric solutions that provide the highest value for them. This offering solves a growing gap in the marketplace that none of our competition can match.”
“I think it was evident today is that this company is built for disruptions that happen in the world,” chief executive David Bozeman said. “And at the end of the day, Robinson moves products around the world for our customers. And we saw really, really high intense problems for our customers. This is not the first time that we've had tariffs that are -- I mean, it's not going to be the last time.”
According to The Wall Street Journal, such companies as XPO, Schneider, Prologis, Kuehne + Nagel, and DSV have opened new facilities, terminals and warehouses — because they expect more, not less, manufacturing trades between the U.S. and Mexico.
In a December press briefing, Bank of America's Mexico head, Emilio Romano, said, “It will be very difficult for uncertainties, either internal or external effects to alter or modify the opportunities that we see in Mexico. We believe that the near-shoring or friend-shoring phenomenon will not be reversed.” He also said that the bank expects to double revenue, with client volume growing from 400 to 800, all over the next five years in Mexico. The bank focuses on institutional banking services and doesn’t serve individual clients.
Nearshoring has been a driving force for industrial demand in Mexico for the last few years. With a 25% increase in domestic freight volume and a 35% expansion of logistics inventory in the past 20 years, the United States requires infrastructure improvements to ensure the supply chain functions optimally, according to a recent Newmark Research industrial report. The firm said there is a strong correlation between investment in transportation infrastructure and expanding industrial occupancy.
While the pace of onshoring to the U.S. has slowed due to limited land availability and higher operational costs, foreign direct investment in Mexico increased 27% in 2023. Chinese manufacturers continued to move operations into the country as demand in border markets in both Mexico and the U.S. surged.
With all the money and attention pumped into nearshoring, tariffs might pale in comparison.