Manufacturing wages are increasing in China, alongside the intensity of the U.S.-China rivalry.

This new problem for Beijing could prove a blessing for the United States and Mexico, especially given Washington’s recent drive to re- and ally-shore manufacting and industry. Perhaps it is time to ask: can these two economies be taken to the next level by increased investment in manufacturing?

Doing so could do more than just provide jobs and support U.S. national security objectives; it could also solve immigration pressures by creating better jobs in Mexico while also expanding U.S. exports to Mexico. In addition, it would strengthen America’s supply chain resiliency

This would also be good news for American manufacturers and, in an odd twist, American workers. After all, about 40 percent of the content of goods assembled in Mexico and shipped out as exports are made in America. For stuff assembled in China, only 4 percent of the content is made in America. Arguably, U.S. imports of Mexican products are ten times better for American workers when compared to Chinese imports.

Let’s take a closer look at the interesting triangle of trade and investment between Mexico, America, and China.

China’s Loss is Mexico’s and America’s Gain 

According to Alix Partners, a consultancy, Mexico has surpassed China as the lowest-cost country in the world for companies looking to manufacture products for North American markets. Mexico’s wages are now about 25 percent lower than in China. When coupled with lower taxes and tariffs, the numbers look even more favorable.

In addition, report demonstrates that across many industries, China’s cost advantage in producing goods and delivering them to Long Beach, California versus an American manufacturer has evaporated. Add to this higher transportation costs and intra North Amerian trade attains a decisive advantage: moving goods by sea from America to Asia takes three to give weeks, while America to Mexico transit time is a mere on to four days.

In addition to the cost factor, flexibility, speed of response, and ease of oversight all supports the movement of production from China to North America. No wonder American bilateral trade with Mexico has been trending up sharply.

Ironically, these very trends have led to Chinese companies moving production to Mexico to avoid trade restrictions and capitalize on the trade advantages that come from geographic proximity.

The Coming North American Boon?

Many U.S. companies are finally realizing that Mexico is a better option than China to manufacture many of the consumer goods for U.S. and Latin American markets. They join an already well-developed and experienced crowd: the United States is already the biggest foreign direct investor in Mexico accounting for about half of all foreign investment, according to State Department sources.

How will all this shake out, and what will American congressmen (and U.S. labor groups) think of U.S. multinationals shifting manufacturing from China to Mexico?

American firms still export three times as much to Mexico as they do to China. And, Mexico, in turn, sends 79 percent of its exports back across U.S. borders. In comparison, Mexico’s exports to its giant neighbor to the south, Brazil, account for only 1 percent of its exports according to World Bank statistics. Mexico has also launched more free-trade agreements that involve more than forty countries—more than any other country and enough to cover more than 90 percent of the country’s foreign trade. Finally, Mexican goods can be exported duty-free to the United States, Canada, the European Union, most of Central and Latin America, and to Japan.

If we can improve safety and security as well as railways, roadways, and ports, we could see a manufacturing boom that lifts both Americans and Mexicans.

Carl Delfeld is a senior fellow at the Hay Seward Economic Security Council, publisher of the Independent Republican, and was U.S. Representative to the Asian Development Bank. His latest book is Power Rivals: America and China’s Superpower Struggle.

Image: Fevziie​/Shutterstock.