The Mexican economy is facing significant challenges as the International Monetary Fund (IMF) has revised its growth forecasts, citing the adverse effects of U.S. tariffs and geopolitical tensions. In its latest World Economic Outlook report released on April 22, 2025, the IMF announced a drastic cut of 1.7 percentage points to Mexico's growth forecast, now expecting a contraction of 0.3% for the year. This marks the largest reduction among major economies globally, highlighting the precarious state of Mexico's economic landscape.
According to the IMF, the downgrade reflects weaker-than-expected economic activity at the end of 2024 and the beginning of 2025, compounded by the impact of tariffs imposed by the United States. President Donald Trump has enforced a 25% tariff on Mexican imports that do not comply with the Treaty between Mexico, the United States, and Canada (TMEC). This protectionist stance has raised concerns about Mexico's economic stability, especially given that 83% of its exports are directed to the U.S., accounting for about 26% of its gross domestic product (GDP).
In 2024, Mexico's exports to the United States reached a historic high of $505.851 billion, with a trade surplus of $171.189 billion, according to U.S. official figures. However, as the U.S. economy begins to slow, the ramifications of these tariffs are expected to intensify. The IMF has also projected that inflation will rise to 3.5% in 2025 and 3.2% in 2026, while unemployment is anticipated to increase from 2.8% in 2024 to 3.8% in both 2025 and 2026.
President Claudia Sheinbaum has publicly disagreed with the IMF's bleak outlook, asserting that her administration's economic models do not align with the Fund's projections. During a press conference, she stated, "We do not agree with this vision because we are working on a plan to strengthen the Mexican economy." Sheinbaum defended the forecasts of the Secretariat of Finance and Public Credit (SHCP), which recently adjusted its GDP growth estimate for 2025 from 2.5% to 1.9% on April 1, 2025, still higher than market expectations.
Sheinbaum's administration has introduced a comprehensive strategy dubbed 'Plan Mexico,' aimed at consolidating the Mexican economy within the global top ten and finalizing private investments totaling nearly $300 billion, despite the looming tariffs. She emphasized that the government is actively pursuing various public works projects and special programs for manufacturing and the automotive industry.
In the broader context, the IMF has also downgraded its growth projections for Latin America and the Caribbean, reflecting the negative impact of Mexico's economic struggles. The growth forecast for the region has been cut by 0.5 points for 2025 and 0.3 points for 2026, now standing at 2.0% and 2.4%, respectively. Countries such as Puerto Rico and Venezuela are expected to experience contractions as well, with Venezuela's economy predicted to shrink by 4.0% in 2025 and 5.5% in 2026.
As the Mexican economy grapples with these challenges, analysts have raised concerns about the potential for a technical recession, defined as two consecutive quarters of negative GDP growth. The Timely Indicator of Economic Activity (IOAE) has indicated stagnation in economic activity, with growth projected at 0% for March 2025.
On March 12, 2025, the U.S. tariffs on steel and aluminum came into effect, exacerbating the situation for Mexico, which has been under the pressure of Trump's tariff policies since he took office. The uncertainty surrounding these tariffs has led to a cautious outlook among economists, with some predicting that the first quarter of 2025 will see a contraction in economic growth.
Mexico is currently engaged in negotiations with the Trump administration to seek preferential treatment in U.S. tariff policies. Discussions are also underway regarding quotas on Mexican tomatoes and water agreements. The outcome of these negotiations could significantly influence the economic trajectory of Mexico in the coming months.
In contrast to Mexico's struggles, Argentina is emerging as a growth engine for Latin America, with the IMF raising its growth forecast for 2025 from 5.0% to 5.5%. This positive outlook is attributed to recent economic reforms and a successful rescue plan from the IMF, which aims to stabilize inflation and reduce unemployment.
As the global economy faces its own challenges, with projected growth of 2.8% in 2025, the IMF warns that high levels of political uncertainty complicate the establishment of a clear growth perspective. The organization has presented various scenarios in its economic forecasts, reflecting the unpredictable nature of international trade relations.
With the specter of recession looming over Mexico, the government faces the daunting task of navigating a complex economic landscape shaped by external pressures and internal policy decisions. The coming months will be critical in determining whether Mexico can rebound from these challenges and secure a more stable economic future.
