Monterrey, Mexico – For more than 15 years, Juan Alvarado has run a small shoe manufacturing business in León, Guanajuato, the shoe manufacturing capital of Mexico. But current trade and political tensions in the U.S.-Mexico relationship, along with tariff-related disruptions, are forcing him to consider diversifying into other areas or simply shutting down the business.
Alvarado told Al Jazeera that the company normally employs up to 25 people, but now it has to cut the number to 15. “You’re up against a wall and you can’t hold out either way. And it all comes down to investment.”
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Negotiations are underway over Mexico’s tariffs after President Claudia Sheinbaum and U.S. President Donald Trump agreed to a 90-day extension that expires on October 31. Mexico will continue to face 25% tariffs on automobiles and 50% tariffs on steel, aluminum and copper, as well as 25% tariffs on goods not covered by the 2020 Free Trade Agreement (USMCA).
For Mexican industries such as footwear, which have faced declining competitiveness against Asian countries for decades, the tariffs the United States imposes on other countries are seen as an advantage in gaining a stronger foothold as Mexico’s largest trading partner.
Juan Carlos Cachato Usabiaga, president of the Chamber of Footwear Industry of Guanajuato (CICEG), said he recognizes the instability that U.S. tariffs bring to business, but that Mexico is currently being given preferential treatment because some of its exports are covered by the USMCA.
“I truly believe that the tariffs imposed on other countries are actually an advantage,” he told Al Jazeera. “As far as footwear is concerned, we can export to the United States while complying with the USMCA rules, which means zero percent tariffs if we comply. So this makes us very competitive compared to other countries that face 20, 30, 40, or 50 percent tariffs.”
President Trump’s tariffs aimed at revitalizing the U.S. domestic industry are having a ripple effect. While some in Mexico see the turmoil as an opportunity, small business owners like Alvarado say the current geopolitical climate and inflation are putting investment at risk.
Alvarado’s business manufactured shoes for a company that exported to the United States. However, despite the USMCA, tariff uncertainty reduced demand and the company suspended all orders from Alvarado.
“Production is currently halted. They were manufacturing 7,000 pairs of shoes (a week), of which Alvarado was supplying about 2,000 pairs,” he said. “It’s really helped my business. (But) now I’m making 800, 700 pairs.”
Apart from manufacturing for large corporations, Alvarado had recently expanded into new sales channels by mailing shoes directly to customers in the United States. This comes after Mexico halted shipments following the U.S. government’s decision to end the “de minimis” exemption that allows packages valued at less than $800 to enter the U.S. duty-free.
Import from China
Mexico is the world’s ninth largest footwear producer, with more than 75% of production concentrated in Guanajuato. Kashat said the industry has been severely affected by Chinese imports and dumping practices.
“Production and employment have decreased significantly, impacting the industry’s GDP,” Kashat said.
Last year, Mexico produced 214 million pairs of shoes. By the end of August this year, production reached 134 million pairs, according to CICEG, based on data from Mexico’s National Statistics Institute. The number of industry employees also fell to 96,929 by the end of August, 4,411 fewer than a year ago.
The Mexican government recently restricted access to the IMMEX program, which was launched in 2006 for the temporary import of materials for re-export after processing. For decades, the program’s abuse of importing finished goods from China, particularly footwear and textile products, not only led to unfair competition and tax evasion by Mexican companies, but also destroyed local industry in the process.
Marcelo Ebrard, Mexico’s Secretary of Economy, reported that shoe production decreased by 12.8% from 2019 to 2024, mainly due to inappropriate use of the IMMEX program by companies. The suspension of imports of finished shoes is aimed at increasing domestic production, combating smuggling and protecting the jobs of 130,000 direct workers and many more indirect workers, Ebrard said.
Mexico also announced plans to set its own tariffs on some imports from countries such as China with which it does not have free trade agreements. These measures are part of Plan Mexico, a national strategy aimed at promoting economic growth and strengthening the country’s role in global value chains.
For Luis Rodríguez Tirado, CEO of Hormas El Arbol, which has been manufacturing shoes for the past 90 years, these tariffs and the suspension of IMMEX are important incentives for the industry to compete on a level playing field.
“We can compete with any other country. If they still beat us, I’m fine with it, but only on equal terms,” he said.
However, some analysts see these measures as simply a response to the intense pressure Washington, D.C., is exerting on the Mexican government, rather than a real effort to crack down on illegal imports.
Workers in Mexico’s large informal sector rely heavily on cheap Chinese products to sustain their businesses and make a living.
Professor Renato Balderrama of the Center for Economic Research and Education (CIDE) points out that goods such as footwear and textiles often enter the country illegally, and believes it will be difficult for any government, even with good intentions, to “wipe out tariffs.”
“There is an informal economy that makes up half of Mexico’s economy, so if you cut off that income, people will go hungry or sell drugs,” he added.
Valderrama added that Mexico urgently needs to diversify its exports, especially to Asia.
“The markets that have grown the most and continue to grow are the Pacific Rim and South Asia, and right now we are cutting ties[with China]and increasing our dependence on the United States.”
Made in Mexico
Shoe manufacturer Alvarado has defined Chinese imports as a “cancer” plaguing the industry. However, he also believes that small business owners are facing increasing difficulty getting through this difficult period, both due to a lack of financial support and the involvement of government bureaucracy.
Experts and industry insiders agree that while Plan Mexico sounds promising on paper, financial support and integrated implementation are key to success.
Balderrama told Al Jazeera that “the strategy is not yet fully realized” and that the necessary resources must be allocated for the upcoming large-scale mission.
However, when it comes to the footwear industry, Kasha said there is no need to start from scratch, but rather an integrated plan to regain what has been lost in recent years. “There’s a lot to like about this industry. Currently, companies are operating at just over half of their production capacity, about 55%,” he added.
Rodriguez agrees that despite the Mexican government’s recent actions, the footwear industry needs to be restructured. Organizing and strengthening small and medium-sized enterprises and addressing the informal sector should be a priority, including supporting access to new and industrial technologies.
“We will need to formalize informal enterprises, including those that are being assessed, so that they have access to better financing and planning,” he said.
A year and a half ago, Alvarado’s business was robbed. Guanajuato faces significant security challenges due to the presence of organized crime and gang activity. As a result of these concerns, micro and small businesses face theft, extortion, and decreased sales. He applied for government support for small businesses, but found the application process took more than a year, and he had to take out a bank loan to recover and stay afloat.
“To maintain a team of employees, you need a weekly paycheck, otherwise people will leave and it will be difficult to retain the team,” he said. “I had to borrow money from the bank to continue working.”
