USMCA ‘Tariff-Shift’ Provisions Offer ‘Massive’ Incentive for Plastics Manufacturers to Route Supply Chains Through Mexico Rather than Rebuild Manufacturing Capacity in U.S.

A provision in the United States-Mexico-Canada Agreement (USMCA), a free trade agreement negotiated by the first Trump administration, could enable Chinese plastics manufacturers to reduce their tariff burden, according to lawyers, supply chain experts, and an industry executive. Manufacturers could qualify for the provision by importing intermediate goods to Mexico and Canada and using them to produce final products there. The final products could then be imported to the U.S. under USMCA.

In 2024, the United States imported over $20.26 billion of potentially eligible goods from China, according to United States International Trade Commission (USITC) data. Before the 2025 trade tensions with China, tariffs on these goods averaged out to 24.55%, according to USITC Data. Recent tariff announcements have added 145% on top of the pre-existing amount. By contrast, products that qualify under USMCA are duty-free, while other imports from Mexico are subject to a 25% tariff.

If more plastic manufacturing is routed through Mexico, that could place the U.S. manufacturers at a competitive disadvantage compared to their Mexican counterparts, according to Jeff Applegate, the CEO of Houston-based Texas Injection Molding. Input goods from Chinese importers would be subject to tariffs in the U.S. but not in Mexico.

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