Demands by labor unions and stricter standards for tariff relief are squeezing manufacturers from Japan and elsewhere that have set up shop in Mexico.

Nikkei Asia says the recent headwinds could force companies that sought to take advantage of cheap Mexican labor to produce goods for the neighboring U.S. market — or near-shoring — to reassess their strategy.

General Motors in March agreed to increase wages at its plant in Silao, in central Mexico, by 10%, outpacing both local inflation and the previous 8.5% hike in 2022.

The hike at GM is part of a growing trend. At a Panasonic Holdings auto parts plant in Tamaulipas, a new labor union, which replaced one seen as close to management, secured a 9.5% pay hike in 2022. A union at Nissan Motor's plant in Aguascalientes is demanding increased wages as well.

These developments stem in part from the U.S.-Mexico-Canada Agreement (USMCA), which took effect in July 2020 as a replacement for the North American Free Trade Agreement. The Trump administration at the time had sought a framework that would raise production costs in Mexico in a bid to bring jobs back to the U.S.