US and foreign corporations are considering Mexico as an ideal location for manufacturing industries. This will provide them with the proximity as well as lower tariffs when destined to the US market. The trade agreement allows goods made in Mexico to enter duty free or at lower tariff rates. Chinese and other firms could use Mexico as an export platform to reach the US market. It is expected that many firms in the auto, electronics and mobile phone sector will re-locate from China to Mexico to bypass the high tariffs on China. In March, 2019 Mexico registered higher exports to the US than China.
Meanwhile, China may use its arsenal to retaliate against the US by imposing quotas on rare earths that are critical for many electronic firms. Even though China dropped its quota in 2015 after losing a case at the World Trade Organization, it may decide to re-impose it since the Trump Administration is not strictly international trade rules in its dealing with other countries.