The World Bank just notched up growth expectations for Mexico, with economic momentum shifting to a still-modest 0.5% in 2025. Marginal improvement since the mid-year outlook is still below the 1.5% growth for the year that was forecast in January. The sober setting can be attributed to the impact of US tariff policies, both real and perceived.
There may be little to celebrate in Mexican top-line data, given the outlook for the external sector. With some 80% of Mexico’s exports heading to the US, President Sheinbaum is forced to carefully manage relations with the White House. Her diplomatic skills are deft. Mexico pays among the lowest effective tariff rates among the major American trading partners, at least for now. That scenario could change abruptly at the end of October, when a 90-day pause in proposed US tariff implementation expires.
A peculiar dimension to US-Mexico relations is the unexpectedly robust ties between Mexico and China. Bloomberg spotlights a new research study from Tecnológico de Monterrey that indicates Chinese investment in Mexico since the beginning of this century may be seven times greater than indicated by official Mexican statistics. Those flows of course have been designed to exploit country-of-origin rules, providing preferential access to the US market. In order to head off White House retaliation, Sheinbaum just announced a fresh set of Mexican tariffs on imports from those nations without a free trade deal in place. The obvious target is China, but the policy also impacts India and South Korea.
While Mexico looks to constrain Chinese industrial activity, the overall outlook for the US-Mexico-Canada Agreement is murky. The terms of the trade pact are not scheduled for review until July 2026. However, Mexican officials are already foreshadowing the likelihood that a portfolio of bilateral agreements will replace the trilateral framework. The macroeconomic impact could be erratic, providing an uncertain footing for most industrial investment over the cycle ahead. ■
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Image shows industrial worker in Mexicali, Baja. Credit: VG Foto at Shutterstock.
