STRATEGY CENTRAL
For and By Practitioners
By Monte Erfourth – March 9, 2025
Introduction
The intersection of Mexican drug cartels, Chinese criminal networks, and the U.S. response to the ongoing drug crisis is one of the most pressing national security threats facing North America today. The illicit drug trade—especially involving fentanyl—has devastated communities across the United States, claiming tens of thousands of lives annually. While Mexico’s cartels continue to exert dominance over the drug trade, China’s role in supplying precursor chemicals and laundering cartel money has exacerbated the crisis. As Washington grapples with solutions, a mix of diplomatic, financial, and potential military strategies has emerged in an attempt to stem the tide of corruption, drug trafficking, and money laundering.
The Mexican Cartels: A Persistent Threat
Mexico’s drug cartels are no longer just criminal organizations; they are sophisticated transnational criminal enterprises wielding immense power and influence. The Sinaloa Cartel and Jalisco New Generation Cartel (CJNG) are the two dominant players responsible for vast networks of drug production, distribution, and financial operations.
These cartels have moved beyond traditional cocaine and heroin trafficking. Today, synthetic drugs—mainly fentanyl—are the backbone of their operations. Fentanyl is highly potent and cheaper to produce than heroin, making it the preferred narcotic of choice for traffickers. The cartels acquire fentanyl precursors primarily from China, manufacture the synthetic opioid in Mexico, and smuggle it into the U.S.
The scale of cartel operations is staggering. In 2022, the U.S. Drug Enforcement Administration (DEA) reported that the cartels were making an estimated $13 billion annually, up from $500 million in 2018. Beyond drug trafficking, cartels have diversified into human smuggling, weapons trafficking, and even controlling entire swathes of Mexican territory through paramilitary-style forces.
Their reach extends well beyond Mexico’s borders. Cartels have infiltrated American cities, using U.S.-based street gangs as distributors while relying on corrupt officials on both sides of the border to facilitate their trade. The corruption they breed further weakens Mexico’s ability to counter their power.
China’s Role: Precursor Chemicals and Money Laundering
China’s involvement in the Mexican drug trade is twofold: supplying chemical precursors and laundering money for the cartels. Chinese criminal groups dominate the supply chain of fentanyl precursors, exporting these chemicals to Mexican cartels, who then manufacture fentanyl for U.S. distribution.
The chemical trade is lucrative. Unlike heroin, which requires poppy cultivation, fentanyl production is entirely synthetic, making it more difficult to track. Chinese suppliers ship precursor chemicals to Mexican ports, particularly Manzanillo and Lázaro Cárdenas, where cartels convert them into finished fentanyl products.
Beyond the supply chain, Chinese underground banking networks have become essential to cartel financial operations. According to U.S. Treasury reports, Chinese money laundering organizations (CMLOs) help cartels evade financial scrutiny by conducting bulk cash pickups in the U.S., converting dollars into Chinese renminbi, and then transferring funds back to cartel accounts. This description oversimplifies a highly complex process that uses illegal and legal means.
The Triad money laundering typically follows a multi-step process designed to obscure the origins of the cash and integrate it into the legitimate financial system. Tridents take possession of Cartel cash and convert it into more manageable forms, such as cashier’s checks or money orders, often using complicit businesses or individuals. These funds are then funneled through a network of shell corporations—paper entities with no real business operations—registered in offshore jurisdictions known for lax financial regulations and strict secrecy laws. By routing the money through multiple layers of transactions across different countries, often using fake invoices, overvalued or undervalued trade deals, and complex ownership structures, launderers create a confusing paper trail that makes it difficult for authorities to trace the illicit origins of the funds.
Once the money has been sufficiently distanced from its criminal source, it is reintegrated into the global banking system through seemingly legitimate investments. The laundered funds may be deposited into offshore accounts under the names of shell companies, then used to purchase assets such as real estate, luxury goods, or financial instruments. Some schemes involve cycling the funds through stock markets or hedge funds, where rapid transactions further complicate tracking. Eventually, the money appears as legitimate business revenue or investment returns, allowing criminals to access and use it without raising suspicion. Legal loopholes, attorney-client privilege protections, and banking secrecy laws in certain jurisdictions make enforcement challenging, enabling these criminal networks to exploit the global financial system for illicit gain.
The Chinese government’s response to these allegations has been largely dismissive, insisting that controlling fentanyl precursor exports is a Mexican problem and does little to reign in the Triads. While some diplomatic engagement has occurred, meaningful cooperation between the U.S. and China on this issue remains minimal.
The U.S. Response: Sanctions, Law Enforcement, and Military Considerations
The U.S. government has deployed a range of strategies to curb the crisis, from financial sanctions to direct law enforcement action. However, debates continue over whether stronger military intervention should be considered.
The U.S. Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned multiple Chinese and Mexican individuals linked to money laundering and fentanyl trafficking. These sanctions block their access to U.S. financial systems and enable asset seizures. While effective in limiting the financial reach of key actors, cartels and their Chinese counterparts often adapt quickly, using cryptocurrencies and other financial loopholes to continue operations.
In addition to sanctions, the Biden administration has increased pressure on China to crack down on fentanyl precursor exports. During a 2023 summit, Presidents Joe Biden and Xi Jinping agreed to renew cooperation on combating synthetic drug trafficking, though the effectiveness of these measures remains uncertain.
U.S. law enforcement agencies, including the DEA, FBI, and Department of Homeland Security, have ramped up efforts to dismantle cartel networks inside the United States. Operations like Last Mile have led to the seizure of millions of fentanyl pills and thousands of pounds of precursor chemicals.
Cross-border cooperation with Mexico has also intensified. The Merida Initiative, which provided U.S. funding and intelligence support to Mexican security forces, has evolved into a broader security framework focused on targeting financial networks, disrupting cartel logistics, and addressing corruption.
However, Mexico’s government has been reluctant to embrace U.S. intervention fully. President Andrés Manuel López Obrador has rejected calls for direct U.S. military involvement, citing concerns over sovereignty. President Sheinbaum of Mexico has been more receptive to combating the Mexican drug cartels but categorically rejects any U.S. military operations inside Mexico.
The Military Option: A Viable Solution or a Dangerous Precedent?
Some U.S. policymakers have proposed designating Mexican cartels as Foreign Terrorist Organizations (FTOs), which would allow for more aggressive counterterrorism tactics, including potential military action. The idea has gained traction among conservative lawmakers, who argue that the scale of cartel violence and its impact on the U.S. justifies a military response.
However, deploying U.S. military forces against cartels presents significant challenges. Unlike terrorist organizations such as ISIS, cartels operate within a sovereign nation that remains an economic and security partner of the U.S.. Direct military intervention could strain U.S.-Mexico relations and potentially destabilize the region further.
The Cato Institute warns that military action could lead to prolonged conflict, as some cartels have developed near-peer combat capabilities, including armored vehicles, drones, and heavy weaponry. Experts argue that a more sustainable approach would involve strengthening governance in cartel-controlled areas, enhancing intelligence-sharing, and expanding economic opportunities to weaken cartel influence.
Conclusion: The Road Ahead
The fight against Mexican drug cartels and their Chinese enablers will require a multi-faceted approach. While law enforcement, financial sanctions, and diplomatic efforts have made some progress, cartels continue to adapt and expand their operations. The U.S. must balance aggressive action against criminal networks with efforts to strengthen Mexico’s institutions, combat corruption, and push China for greater accountability. However, achieving this while eliminating corruption seems like a bridge too far for most local Mexican governments without massive reform and political will.
As the fentanyl crisis worsens, Washington faces mounting pressure to act decisively. Whether through increased border security, expanded law enforcement efforts, or a shift toward military engagement, the battle against cartels and their global allies remains one of the most complex and urgent national security challenges of the 21st century.
Works Cited
Calderón, María. Mexican Cartels and the FTO Debate: Designation Process & Government Stakeholders. February 2024.
Felbab-Brown, Vanda. "How is China involved in organized crime in Mexico?" Brookings Institution, 23 February 2022.
Office of Public Affairs, U.S. Department of Justice. Federal Indictment Alleges Alliance Between Sinaloa Cartel and Money Launderers Linked to Chinese Underground Banking. 18 June 2024.
U.S. Department of the Treasury. Treasury Sanctions Mexico- and China-Based Money Launderers Linked to the Sinaloa Cartel. 1 July 2024.
Whitepaper Security Taskforce. U.S.-Mexico Security Cooperation 2018-2024.
Ziccarelli, Kristen. The America First Approach to Defeat the Cartels. Center for Homeland Security and Immigration, 6 September 2023.
Buck, Brandan. Reconsidering U.S. Special Forces Deployment against Mexican Cartels. Cato Institute, 13 November 2024.
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