MONTERREY, MEXICO – Only one of the five machines at a metal products factory in Apodaca, Nuevo Leon state in northern Mexico has been in operation for almost a year. After US President Donald Trump imposed tariffs on steel and aluminum, small businesses were forced to drastically reduce production capacity.
“It had a big impact on us,” José David García Torres, head of operations at Maquinados Bela, told Al Jazeera. “Many companies decided to stop production and our services were no longer needed. We were shut down for months and literally doing nothing.”
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The United States initially imposed a 25% tariff on steel imports in March, which doubled to 50% in June. Mexico’s steel and aluminum exports to the United States fell by 29% and 21%, respectively, in the first seven months of this year, according to data from the U.S. Department of Commerce, the most recent data available.
Tariff negotiations continue after Mexican President Claudia Sheinbaum and President Trump spoke by phone on October 25th. A 90-day extension of the tariff suspension on most items except steel, copper and aluminum that was scheduled to expire on Oct. 31 has been extended “for several more weeks,” Sheinbaum said.
Belén Iliana Vázquez Galán, an economics professor at Monterrey’s research institute Colegio de la Frontera, told Al Jazeera that the latest tariffs cover a wide range of products, including steel and aluminum.
“That applies not only to the steel industry, but also to the automotive industry, electronic products, machinery production, and anything involving steel, aluminum and copper,” she says.
Nuevo León Governor Samuel Garcia declared at a trade fair in September that the state’s steel and aluminum industry was affected by tariffs applied under Section 232 of the Trade Expansion Act of 1962, which authorizes the president of the United States to impose tariffs in the interest of national security. At the event, Garcia pledged support for major companies such as Nemac and Ternium, but Al Jazeera could not be reached for comment.
Known as Mexico’s industrial powerhouse, Nuevo León has made public announcements of large-scale overseas investments in recent years, rebranding itself as a leading nearshoring city. This was primarily driven by the Tesla Gigafactory construction announcement in March 2023. The project, which brought immense pride to the region and the country, is now widely believed to have been scrapped after Tesla CEO Elon Musk postponed it to July 2024 due to uncertainty surrounding trade policy between Mexico and the United States and in the run-up to that year’s US elections. The Mexican government insists it is simply holding it back.
This uncertainty has a major impact on small and medium-sized enterprises, which once believed that they would directly benefit from the influx of foreign investment.
“If we’re getting this much investment, I think it’s for bigger companies. Our factories are more abandoned,” García-Torres said.
Until now, Nuevo León’s high demand for production has also benefited small workshops like Maquinados Vela, which are not directly connected to large companies. “Before, it was like, ‘I have too much work and I’m at my limit.’ People call you to offer you work, not to ask you for work,” García-Torres added.
Jorge Rodríguez, who runs a metal fabrication factory in Cadereita, a predominantly agricultural and livestock municipality 40 kilometers (25 miles) southeast of Monterrey, agreed that orders have slowed in the months leading up to presidential elections in both countries. However, work stalled earlier this year following President Trump’s tariff announcements and the resulting uncertainty.
“Orders have decreased significantly,” he said. “The company I work for exports products. They (exports) have almost completely stopped and I don’t manufacture anything for them anymore.”
Emmanuel Lu, Nuevo Leon’s deputy economic secretary, insisted that the impact on the state’s industry has been minimal. Lu told Al Jazeera that he sees this new climate as an opportunity to strengthen local supply chains and increase global competitiveness.
“What we have seen is a reorganization of the steel production chain, where Nuevo Leon’s industry has bought from local industry,” Lu added.
Made by Nuevo Leon
For some small businesses, the tariffs meant halting production at larger companies, such as machining bushings and pins for hoppers and making all the jigs and tools needed to bend and assemble the products. These companies have had to shift their focus to local consumer demand and, in some cases, have had to lay off employees.
Rodriguez told Al Jazeera that while local demand was always there, industrial demand was so high that small businesses like his never prioritized it. This year, these small orders have been their lifeline.
“There was money in the industry, which was good. But then the industry stopped and they needed people to take on small jobs. They’re small jobs, but eventually they add up and you get 10, 15 orders and then you can start paying salaries again,” he said.
Maquinados Vela also stayed afloat with small orders. García Torres explained that, like other companies, they had to diversify their production and manufacture mechanical parts with which they were not accustomed. “Someone asked me to build a grill, so I built one,” he said.
The Nuevo León state government promotes local products, job creation, and entrepreneurial connections through its Made in Nuevo León initiative. Mr. Lu highlighted that the state is promoting tax incentives for companies that use local supply chains, as well as loans for small and medium-sized enterprises for capital investment and the integration of key sectors such as the automotive and high-tech industries into global value chains.
However, Vázquez said it is always difficult to integrate local small and medium-sized enterprises into global supply chains. It remains difficult for small and medium-sized enterprises to meet the high demands of foreign companies in terms of both quantity and delivery time.
“Integration is generally done for jobs only. In other words, the only benefit foreign companies bring is job creation,” she said.
“Made in Nuevo León” has much in common with “Plan Mexico,” a plan launched by Sheinbaum in January to increase Mexico’s global economic competitiveness and strengthen its domestic market. Analysts believe that securing domestic production in the domestic market is a key issue.
“So how do you tell companies that currently allocate, for example, half of their exports to other markets, to sell in Mexico when there is no market or when prices are not competitive?” Vazquez asked.
With next year’s review of the United States-Mexico-Canada Agreement (USMCA) looming, the challenge of creating the conditions for growth in Mexico’s domestic market is intensifying. Lu told Al Jazeera in early October that the Nuevo León state government is working with the U.S. government to ensure that Mexican aluminum and steel are treated equally under USMCA rules of origin and can be exported to the U.S. “virtually duty-free.”
“This is what we are trying to do, not because the industry is affected, but because this is an area of great opportunity and competitiveness for Mexico as a country and region, and for the steel and aluminum companies in the state,” he added.
Mexico’s essential role in the U.S. supply chain highlights the need for intertwined supply chain strengthening.
“The U.S.-Mexico relationship is at a critical juncture because the Mexican economy has always been dependent on the U.S. economy and through the U.S. economy on international trade and foreign investment,” Vázquez said.
To protect its domestic industry, Mexico has applied interim tariffs of up to 25% on steel imports from countries with which it does not have free trade agreements, including China, Mexico’s second-largest trading partner after the United States, but many see the move as an attempt to placate President Trump, as the United States is embroiled in a serious trade war with China.
Vázquez asks, “But what benefits will Mexico gain if it also closes its doors to trade with the United States? In other words, Mexico cannot recognize the deal with China and cannot strengthen its trade relationship with the United States.”
Meanwhile, Garcia-Torres and Rodriguez are beginning to see a cautious glimmer of hope after months of uncertainty. Currently, all machines are in operation at Maquinados Bela. Although orders remain minimal, we are starting to hear more and more about large companies returning to their previous production rhythms.
“They (companies) say things are getting better, but we won’t get excited until we see the purchase orders. That’s when we’ll get excited,” Rodriguez said.
