Cost Savings to Counteract Tariff Increase: A Look at Labor by the Numbers

Key Takeaways:

• Duty conditions and trade disputes have affected manufacturers, with some projects being temporarily or indefinitely placed on hold.

• Despite the tariff shifts, there’s still value in manufacturing in Mexico, especially with regard to labor cost savings.
• Getting a customized breakdown of labor expenses from a shelter company can help manufacturers decide strategic next steps.

The rising cost of materials is causing global disruption among the manufacturing industry, with ongoing tariff shifts leading to uncertainty and indefinite pauses on operations.

However, waiting for material prices to stabilize before expanding production isn’t a sustainable strategy, as tariffs will affect manufacturers regardless.

Manufacturing in Mexico offers a strategic way to save on costs that can counteract tariff increases and keep operations moving forward and lessen the overall impact.

These savings start with labor.

U.S. and Mexico: Viewing Labor Costs Side by Side

U.S. manufacturers can complement their current production at a lower cost with nearshore manufacturing in Mexico.

The availability of an industrially qualified workforce in Mexico creates greater efficiency and productivity. Manufacturing companies can fill assembly and operational positions, leaving more bandwidth to focus on areas such as research and development.

Additionally, the cost comparisons between roles in the U.S. vs. Mexico show significant savings as seen below:

The amounts listed for Mexico labor costs are fully burdened salaries, which include benefits and employer costs. Though, it’s important to note, the greatest cost savings typically apply for manufacturing companies with greater volume and 50 or more employees.

Additionally, an extra day of productivity from a 48-hour work week recognized in Mexico, as well as a bilingual mindset and culture, are more aligned with the U.S. standard compared to language and cultural barriers when outsourcing production to China or another offshore country.

Leveraging Manufacturing in Mexico

As tariff negotiations continue, and an unpredictable long-term impact, it’s worthwhile to analyze labor cost savings that are currently available when manufacturing in Mexico.

Duties will apply regardless of where materials are imported from. However, there won’t be the same cost savings on labor as in Mexico. Furthermore, Mexico is part of the USMCA and continues to align as a closer ally to the U.S. than other countries.

Furthermore, working with a Mexico business shelter provides support and local expertise to expedite manufacturing setup through services, including HR, taxes and accounting, trade compliance, and other administrative departments.

Local Expertise, Lasting Value

While the discussion continues to revolve around tariffs, look to nearshore manufacturing to see how you can still successfully save costs.

At IVEMSA, we work closely with manufacturers to help them determine if they’re a good fit for the Mexico business shelter model based on their goals. Plus, we can provide a customized labor costs comparison to show how much you have the potential to save.

Learn more about the advantages of Mexico manufacturing and how our shelter company can help you save costs. Contact our team today.