What does a second Trump administration mean for responsible business in Mexico?

The start of the second Trump administration in the United States should raise concerns among businesses operating in Mexico, in particular with respect to the President’s views on trade and immigration. 

The relationship between the US and Mexico —representing the largest migration corridor in the world—did not deteriorate during President Trump’s first term. In fact, trade between the two countries grew stronger,  laying the groundwork for Mexico to overtake China as the leading US trade partner for the first time in 20 years. 

But President Trump’s second term begins with new threats of potentially steep tariff increases and mass deportations of Mexicans and other non-citizens working in the US without proper documentation. If the US government follows through, consequences for the region’s stability and for businesses that heavily rely on a migrant labour force will be significant. 

Mass deportations in the world’s largest migration corridor would have serious economic consequences. Remittances—the earnings migrant workers send home, which account for 3.7% of Mexico’s GDP (nearly double the revenue from oil)—would drastically decline. 

For the US, deporting undocumented Mexican immigrants—who make up over 11% of the agricultural workforce and contribute 9.8 billion USD in taxes—would worsen labour shortages in a sector already struggling to meet demand.

For businesses looking to reduce the significant risks this poses to their operations, and to the workers and communities impacted by their activities, what are some of the challenges that lie ahead?  And how should responsible business leaders be prepared to take action? For business leaders wanting to operate responsibly, knowing the impact of previous US-Mexico trade policy on migrant workers, as well as the current local context and unique challenges, is vital. 

Trump’s first term: promises and realities for Mexico

The US-Mexico-Canada Agreement (USMCA), which entered into force in 2020, has been central to trade relations in the wider region. Exports of goods and services through the USMCA account for 10% of US GDP, 30% for Canada, and 40% for Mexico.

Despite promises that Mexico would have to pay for a border wall and face tariff increases threatening the economic stability of the region, Mexico didn’t comply with Trump’s first  term demands. 90% of temporary work visas were granted to Mexicans, and although tariffs were raised on exports, this only impacted aluminum and steel for no longer than a year as commercial ties between Mexico and the United States strengthened during this period.

Mexico’s young workforce, low labour costs, and proximity to the US have led many companies to move production in their supply chains to Mexican cities instead of employing labour from far away continents, part of the so-called ‘nearshoring’ that the COVID-19 pandemic accelerated. Nearshoring - returning production geographically closer to where goods are sold - promises up to 46 billion USD in investment in Mexico in the coming years. Companies like Tesla, Lego, and Foxconn (the iPhone assemblers) have announced plans to construct their largest factories in northern Mexico.

Leveraging trade at the cost of migrant rights

Despite the positive commercial impacts, the strengthened trade relationship between Mexico and the US during the first Trump presidency was built in significant part on policies that adversely impacted the human rights of migrants crossing through Mexico. The rights of these potential workers will be even more at risk in the time ahead.

Migrants detained in Mexico are rarely deported directly to their communities of origin. Instead, they are temporarily held and transported to the southern border of the state of Mexico, where they were detained, forcing many to return on their own after being physically and financially worn down. 

This system exposes migrants to widespread violence, as Mexico has experienced recent record levels of homicides and disappearances. It is estimated that one in three migrants falls victim to crimes like extortion, kidnapping, assault, or human trafficking, with seven out of ten women migrants facing sexual abuse. According to The Robert Strauss Center for International Security and Law, cartels earn up to 134 million USD annually from crimes against migrants. 

The Mexican government also deployed more than 25,000 members of the Mexican National Guard to serve as border patrol agents. Civil society organisations reacted by denouncing deployment of  military forces and alleged that the actions institutionalised violence against migrants, with soldiers treating them as “enemies of the state.”

We are likely to see further such steps during the second Trump administration. As businesses continue to benefit from migrant labour, they risk entanglement in a state-enforced framework that perpetuates violence and exploitation. In the current context, where migration restrictions are again being leveraged as a trade tool, companies must carefully assess and mitigate the reputational, ethical, and operational risks tied to such practices.

Knowing the human rights risks

If trade ties between Mexico and the US stay on track, global brands could continue capitalising on the nearshoring trend by building manufacturing and logistics facilities in Mexico. The nearshoring trend presents significant opportunities for companies, but these gains cannot come at the cost of protections for migrant workers who are so vulnerable to abuse. 

Such a scenario would potentially impact Mexico's northern states (where deported migrants may end up). How can companies protect their investments while avoiding involvement in the exploitation of migrant workers? One of the first actions to be taken is for businesses to know the risks in their core operations and supply chains. 

Brands seeking to boost supply chain efficiency by relocating operations to Mexico must carefully consider how the following factors will impact their operations, and be prepared to work with local partners to address any human rights or environmental impact risks:

1. Nearshoring: The manufacturing sector is one of the most important in Mexico, contributing 20% of the country’s GDP and attracting significant nearshoring investments.
   
   These investments should take into account the following:
   
   The construction of industrial parks: According to findings from Deloitte, six states in Mexico are projected to attract significant new investments in the form of the construction of ‘industrial parks’ as part of a nearshoring drive. These parks are the first link in the supply chain of the manufacturing industry. Logistics and services provided by industrial parks involve various local companies responsible for ensuring the supply of water and energy, as well as maintaining the health and safety conditions of manufacturing facilities. While some major Mexican industrial real estate companies publish ESG (Environmental, Social, and Governance) reports, investors must pay close attention to their commitments and adherence to standards such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Responsible Business Conduct. Furthermore, Mexican states where parks are expected to be built include some of the world’s most violent cities. These states are also affected by severe water scarcity, a challenge faced by more than half of Mexico.
   
   Labour union practices and fair representation of vulnerable groups: Labour unions in Mexico are known for being more employer-friendly than worker-friendly. Leaders of the 15 largest unions in the country have held their positions for periods ranging from 15 to 43 years, reflecting a lack of democratic practices. Although women make up more than 35% of the workforce in the Mexican manufacturing sector, they earn 23% less than men and are underrepresented. Less than a quarter of labour unions in Mexico are led by women. Additionally, considering the anticipated surplus of returnees and passing migrants seeking work in Mexico’s northern states, labour unions must establish standards and mechanisms to represent and protect the rights of migrant workers, especially of women migrant workers, as they are more vulnerable to harassment. 
   
2. The impacts of restricted migration flows. More detentions of migrants and mass deportations from the US increase the possibility of a surplus of workers seeking low-wage and precarious work in Mexico. It’s crucial for companies investing in Mexico and the wider region to understand where their workers are coming from and the conditions under which they are employed as they build their operations. 
   
3. The violent context in Mexico. Businesses must assess the extent to which their workers, particularly migrants, are exposed to insecurity and violence stemming from cartel activities, exacerbated by impunity and weak judicial institutions.
   
4. The implications of inadequate water management. Poor water management practices and regulations have resulted in a lack of access to this crucial resource in Mexico. Inattention by foreign companies to this growing crisis could lead to significant risks not only to local communities but also to the stability of business operations. Companies investing in the region should priortise understanding water-related challenges - particularly in the construction stage of industrial parks -  and be prepared to engage in ongoing consultations and joint actions with state authorities, community groups, and experts to ensure equitable access to water.
   

Stepping up to protect migrant workers’ rights

Given the potential for the US administration’s policies to exacerbate the risks highlighted above, responsible businesses will recognise that this is a moment in which short-term focus on profit-driven motivations could lead to terrible impacts on individuals and communities at risk, especially migrant workers and their families. Global brands know the importance of adapting to the local context and seeing local suppliers as allies. But in such an uncertain time, the need to secure solid long-term partnerships and prioritise responsible business standards to protect the human rights of workers and communities is more urgent than ever. 

That includes paying special attention to responsible recruitment practices to mitigate the vulnerability of migrant workforces. It also means actively engaging with local civil society organisations and trade unions to identify labour and security risks, particularly in the context of increasing migrant detentions and potential mass deportations.

By collaborating with local organisations, and integrating human rights due diligence processes into their operations, companies will be on the right track in advancing worker rights while protecting their nearshoring investments. Mexico represents a promising location for regional trade and strengthened economic activity in the years ahead. But the country and the wider region also face serious human rights challenges that must be addressed. Business leaders who seek to understand the local context and commit to implementing effective due diligence throughout their operations can play a critical role in fostering a more prosperous and sustainable future for people in Mexico and beyond.