When we talk about dropshipping or wholesaling, we are often torn between Mexico and China. While China has long been the powerhouse of cheap manufacturing, here’s why more and more business owners are choosing to ship from Mexico instead.
In this article, we will discuss the key considerations when shipping from Mexico or China to the USA, so that you can make the best decision for your business.
Time from Mexico vs China to the USA
For many businesses, time is money. Every single day that your goods are stuck in shipping is a loss of opportunity for you. Shipping from China to the USA takes at least 4 to 8 weeks due to the transits required at different ports. And this could be even longer for shipments to the East Coast or Middle America.
During this period, shipments could be susceptible to delays caused by unexpected port congestion. This may delay shipments for a few days to up to months in the worst-case scenario.
More recently, with the strict covid restrictions imposed in China, we have also seen first-hand how border restrictions may affect us. Even within the country, factories may be shut down and shipping could be severely delayed before it reaches our customers in the United States.
Things are a lot brighter in Mexico. Factories are no more than a short flight away should you need an audit or a meeting, and the language barrier is also far less of an issue.
Shipping Costs from Mexico vs China to the USA
We mentioned earlier that shipments from Mexico take a lot less time to arrive. The shorter distance also provides savings in shipping costs.
The price of oil has been on the rise for the past few years, and many other factors such as Peak Season Adjustments (PSA) can quickly increase the cost of ocean freight. Unfortunately, this is the only mode of transport that is feasible for shipments coming from China as it has to come through the Pacific Ocean.
The constantly increasing shipping costs can dramatically increase the difficulty to forecast the shipping costs from China to the USA. This also causes instability for businesses with frequent shipments from China.
On the other hand, there is a lot more flexibility for shipments from Mexico. Shipping from Mexico to the US can also come in by truck or rail – methods which aren’t affected by congested ports. And thanks to the shorter distance, shipments from Mexico can be anything up to 2 or 3 times cheaper than similar shipments arriving from China.
Trade Agreements between Mexico and the USA
As we know, China and the US have a famously strained diplomatic relationship. The ongoing geopolitical tensions may add unnecessary stress and uncertainty for businesses that rely on the movement of goods between the two.
The United States has imposed high tariff rates for nearly all goods arriving from China. Currently, a 25% tariff is applicable for imports from China. And that’s on top of the standard duty tax applied to nearly all imported products.
Mexico has neither of these problems.
Mexico and the US have a fairly close and productive working relationship, which extends to the movement of goods. Under the USMCA, an agreement between the United States, Mexico and Canada, most imports from Mexico are entirely free from tariffs!
Even the goods that are subjected to import tariffs can enjoy reduced rates. This means these goods will be still cheaper to import from Mexico. That’s a lot of indirect savings through the tax treaties alone.
Labor Costs in Mexico vs China
China has been the ‘go to’ manufacturing powerhouse for so long because of its historically cheap cost of labor. However, things have very much changed in recent years.
China has recently seen wage increases at an average of more than 7% per year. Today, salaries for skilled labor in China can cost more than 1.2 times that of Mexico’s.
This wage difference is brought further apart by the favorable exchange rates. Over the past few years, the Peso has steadily declined against the strengthening US dollar. This makes Mexico a competitive choice for skilled labor.
Why you should start shipping from Mexico today
In summary, shipping from Mexico instead of China can save your business time and money across many different aspects.
If you are planning to move manufacturing to Mexico, you will need to know where to begin.
At Zipfox, we can help your company find your next manufacturing partner hassle-free through our curated lists of Mexican partners.
