Xero only pulls in customers from the Xero contact list, not just contacts. In order for a contact to become a "customer" in Xero, it will need to have an invoice associated with it. If this is the first time a customer has been used in Xero, you can create a fake invoice for that customer, void it out, and then re-sync your connection to Xero in Expensify in order to then pull in this new "customer".
To do this, in Xero, click into the contact, then select New > Sales Invoice:
Fill out the few required pieces of information, save the invoice, and then go ahead and void it. Click Invoice Options > Void.
Your customer will now show up as a customer. Re-sync your Xero connection in Expensify and you should then see the customers appear in your tag list.