By Gabriel Burin
(Reuters) – Mexico’s economy will barely grow at all this year thanks to the U.S. tariff shock after standing on the brink of technical recession last quarter, a Reuters poll showed.
Extreme uncertainty over U.S. President Donald Trump’s push to rearrange global trade is set to continue hurting private spending and investment in Latin America’s No.2 economy, analysts said.
Worries are now centered on the potential impact of extra U.S. levies on car parts. Mexican President Claudia Sheinbaum is seeking to minimize the damage through negotiation as well as with support for local projects.
Mexico’s gross domestic product is expected to increase just 0.2% this year, according to the median estimate of 32 economists polled April 21-25, a sharp 1 full percentage point downgrade from 1.2% seen in January’s poll.
This forecast is far worse than the government’s rosy outlook of 1.5%-2.3% growth, but still above the International Monetary Fund’s view of a 0.3% contraction which prompted an official retort last week.
Rodolfo Mitchell, Scotiabank’s head economist for Mexico, noted the slowdown had started last year as markets reacted negatively to some government reforms and a weak fiscal position.
“Furthermore, the arrival of Trump to the White House and his tariff policy have exacerbated downside risks related to growth,” Mitchell added.
“This has resulted in the expectation of economic contraction for 2025 due to stagnant investment, a contraction in production and a sharp slowdown in consumption.”
All 12 respondents who answered additional questions in the poll viewed risks to their 2025 GDP forecasts tilted to the downside. None saw chances of higher growth than expected.
In a separate question on how U.S. tariffs had hit business sentiment in Mexico, six respondents chose the “negative” option (50% of total replies), five leaned towards “very negative” (42%), and one for “neutral” (8%).
None answered “positive” or “very positive”. The elevated ratio of very negative responses contrasted with results in a Brazil poll earlier this month, where only one of 21 analysts (5%) took an acutely pessimistic view.
This reflected fears of direct effects on Mexico from the tariffs on top of concerns of worsening international conditions affecting all economies.
Mexico probably avoided a technical recession by the tightest possible margin, logging no growth – but not a contraction – last quarter, according to a different Reuters weekly poll for a preliminary reading due this week.
However, this consensus estimate for the country’s preliminary GDP data was more optimistic than a separate call of a 0.4% contraction for the final reading in the quarterly Reuters poll, which would confirm a recession.
Analysts lifted their views for the preliminary figures following a good number for a leading indicator on Friday, but even if proved right, flash data could be reviewed to the downside in the final release.
Mexico, along with Canada, was hit by a special 25% tariff related to uncontrolled migration and fentanyl traffic, plus 25% global duties on cars and metals. In addition, both face another global 25% levy on auto parts.
As goods complying with the USMCA trade deal are excluded from Trump’s duties, the general effective tariff for Mexican products is 12.7% currently – much higher than just 0.2% in 2024, according to Banamex.
To reduce that surcharge, some firms will probably try to increase so-called regional content, which would raise industrial costs in Mexico. Others are already shifting production to the U.S. at the expense of Mexican jobs.
“It is up to Mexican companies to make the necessary changes to maintain and renew their participation in the U.S. market,” Banamex said in a report last week.
“Mexican authorities will have to facilitate this transition and maintain prudence in negotiations with the U.S. in light of the imminent renegotiation (which will no longer be a revision) of the USMCA.”
(Other stories from the Reuters global economic poll)
(Reporting and polling by Gabriel Burin in Buenos Aires; additional reporting by Noe Torres in Mexico City; Editing by Ross Finley and Jan Harvey)
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