The impact of America’s reindustrialization has displaced China in a way no one saw coming.
Now, there is a “new China” and it happens to be the U.S.’s largest goods trading partner.
Think machinery, fuels, vehicles, and plastics. And it’s powering America’s historic reindustrialization.
Today, I’m going to explain how America’s manufacturing renaissance is being supercharged by a country you might not expect. And how you can capitalize on it.
The New China
The magic of trade is called comparative advantage.
It means that when everyone does what they do best, everyone wins. That’s why you bought a car instead of trying to engineer and assemble one yourself.
That simple concept drove the original industrial revolution of the late 1700s in Great Britain. And it’s just as applicable to America’s reindustrialization today that we’ve been writing about.
The U.S. has among the most productive workers in the world.
But our population isn’t growing fast, and our unemployment rate is a mere 3.6%.
Add inflation, and U.S. labor is expensive.
Labor shortages have only become worse since the pandemic. And that’s happening in many countries, not just in the U.S.
Wage growth is great for workers.
But when it rises too quickly, the whole economy suffers. Businesses can’t compete and that hurts workers and business owners alike long-term.
America’s comparative advantage is in high-end manufacturing.
That’s why our wages are among the highest in the world.
But without affordable lower-skilled labor, America’s reindustrialization is incomplete.
It can’t reach its full potential. It’s like trying to build an apartment complex with only engineers and bankers.
That’s where Mexico comes in.
With a population of 127 million, it ranks 10th globally.
Mexico’s labor is 80-90% cheaper than the U.S.
That’s huge, but there is an even more important fact about Mexico’s labor. It’s now 30-40% cheaper to manufacture goods in Mexico than China.
And the story doesn’t stop there.
Mexico is part of the North America Free Trade Association (NAFTA), so companies in the U.S. avoid tariffs. That creates big savings compared to working with Europe and Asia.
Mexico is also connected to the U.S. with highways and trains. Shipping is cheaper, faster, and more reliable. That’s an advantage no country overseas will ever have.
Lastly, unlike China, Mexico isn’t a geopolitical rival.
On top of that, over 80% of Mexican exports go to the U.S. And nearly 50% of imports to Mexico are from the U.S.
It’s a mutually beneficial relationship. And one where the U.S. holds most the cards.
Profit from the New China
Thanks to America’s unique relationship with Mexico, certain U.S. companies stand to profit massively.
And here’s how you can capitalize on it.
Ford (F) recently invested another $760 million to grow its Mexican footprint.
It plans to triple its EV manufacturing capacity in the country. This is critical to improving Ford’s margins in its EV division.
Right now, that’s the major drag on earnings.
It needs both highly skilled U.S. labor and lower-cost Mexican labor to compete with EV manufacturers like Tesla (TSLA) and BYD (BYDDF) in China.
That’s why Ford’s expansion in Mexico is critical to boost profits and increase competitiveness.
We think this will drive Ford back to 52-week highs, which is 70% above current levels.
You may be wondering how long Ford’s been making vehicles in Mexico. Do they have enough experience?
I’ll give you a clue. The first car produced in Ford’s Mexican plants wasn’t a Mustang or F250. It was a Model T in 1925.
The days of everything being “Made in China” are behind us.
Make sure you get in on the ground floor.
Happy Investing,
Stephen Hester
Analyst, Intelligent Income Daily
P.S. If you’re interested in learning more about the reindustrialization of America and how to profit from it, click here to send me your questions.