Gabriel Burin
BUENOS AIRES (Reuters) – Mexico’s economy will remain sluggish this year, a Reuters poll of economists showed, as the country braces for a possible radical overhaul of U.S. tariffs and migration rules that could dramatically worsen the outlook.
Private consumption and investment, already weakened by this high uncertainty and elevated interest rates, are likely to receive some support from steps aimed at low-income earners and certain industrial sectors.
But Mexicans are awaiting the inauguration of US President-elect Donald Trump on January 20 to see if he will follow through on his threat to impose 25% tariffs on goods crossing the border. Mexico currently has a free trade agreement with the US and Canada.
In Mexico, Latin America’s second-largest economy after Brazil, gross domestic product is expected to expand 1.2% in 2025, compared with 1.6% last year, according to the median estimate of 32 economists polled Jan. 9-16.
“The outlook for growth is weighed down by three main factors: reduced resilience in personal consumption, weaker export performance and a decline in fixed real estate investment under the influence of US political uncertainty and the Mexican legislative agenda,” wrote Pamela Diaz Loubet, Mexico economist at BNP Paribas (OTC: ).
“While nearshoring remains a long-term opportunity, political noise and investor reluctance are delaying expected capital inflows, previously seen as drivers of recovery.”
Mexican President Claudia Sheinbaum’s administration has signaled it expects to avoid tariffs threatened by Trump’s crackdown on illegal migration and drug trafficking to ease U.S. concerns.
In another apparent nod, Mexico unveiled a plan to curb imports from China following Trump’s accusations that it has become a back door for Chinese goods entering the United States.
But even with the government currently focused on fiscal restraint and global bond yields rising, the survey suggests the central bank, Banxico, has limited room for more aggressive policy easing to support activity in a worst-case scenario.
The bank cut its benchmark rate to 10% from a record 11.25% in five moves of a quarter of a percentage point last year. It is projected to decrease by an additional 150 basis points to 8.50% by the end of 2025, the media poll showed.
When asked how the central bank would react if Washington announced new tariffs on Mexico this month, seven out of 11 respondents said it should maintain the currently expected path of monetary easing.
Three said they would cut rates less than currently expected, while only one expected deeper cuts.
“While higher tariffs would further hamper growth in Mexico, the immediate response is to at least maintain the pace of cuts — no acceleration to 50 basis points,” said Alberto Ramos, head of Latin American economic research at Goldman Sachs.
“Banxico will find it difficult to follow a very tricky path. By doing so, they would provoke a negative market reaction that could lead to tighter rather than looser financial conditions, and soon force the central bank back to a conservative stance.”
(Other stories from the Reuters Global Economic Survey)
(Reporting and polling by Gabriel Burino in Buenos Aires; Additional reporting and polling by Noe Torres in Mexico City; Editing by Ross Finley and Tomasz Janowski)
