The Mexican economy's growth in the first quarter of 2025, through the timely GDP data, "deceived" the markets, as the main indicators of domestic demand, consumption, and investment continue to deteriorate. According to seasonally adjusted data from the National Institute of Statistics and Geography (INEGI), the monthly indicator of private consumption in the domestic market fell 0.72% year-on-year in February 2025. This decrease in the domestic demand indicator, which measures household spending on the consumption of goods and services, marked the third consecutive decrease.
Key indicators of aggregate demand (investment and consumption) showed a slight improvement, but a noticeable weakness persists among the components within them, considering the risks of the national and external economic environment, reports Monex. The monthly indicator of private consumption had not presented three consecutive falls since the first months of 2021, a situation that is alarming given that it represents the largest component of the Mexican economy (71% of national GDP).
Despite a marginally positive GDP growth in the first quarter, the Mexican economy continues to face a complex environment. The main risks for consumption remain a weak labor market, public insecurity, high-interest rates, inflationary pressures, and elevated uncertainty, according to Banco BASE. The financial group maintains its projection of a 1.2% growth for private consumption in 2025, down from 2.7% in 2024. If this projection holds, it would imply a significant deceleration of the main component of GDP, keeping the likelihood of recession in Mexico high for this year.
Meanwhile, gross fixed capital formation, which reflects the behavior of investment in fixed assets in the short term, decreased 6.01% annually in February 2025, marking its sixth consecutive decline. Investment remains one of the most affected areas. Experts expect this to weigh on growth for much of the year, noting that commercial uncertainty has hindered certain investment announcements. However, it is noteworthy that there are currently no recorded cancellations of investments, according to Secretary of Economy Marcelo Ebrard. Another factor to consider, experts emphasize, is government spending on infrastructure and the role of the private sector in mixed investment, after President Claudia Sheinbaum indicated a desire to share responsibility and risk.
In this context, the federal government has maintained the "Mexico Plan" as its roadmap for industrial policy, aiming to accelerate government spending on infrastructure and increase private participation while keeping goals for attracting investment and minimizing the trade deficit with China.
On another front, exports of products from Mexico to the United States grew in March 2025 at an interannual rate of 15.4%, reaching $47,982 million, according to the Census Bureau on May 6, 2025. This result outperformed the other two main trading partners of the United States: exports from Canada to that market rose 4.2% to $35,668 million, while those from China fell 1.9% to $29,384 million.
The comparative base boosted Mexico's results, as Holy Week fell in March 2023 and in April 2024, leading to fewer working days in March 2024. However, there were also negative factors, including the 25% tariff that the United States began applying on March 12, 2025, affecting imports of steel, aluminum, and some derivatives of both metals from all countries. Additionally, since February 4, 2025, the United States has imposed a 25% tariff on all Mexican products that do not comply with the Treaty between Mexico, the United States, and Canada (T-MEC).
The new tariffs ordered by President Donald Trump pressured an increase in exports to the U.S. market in the weeks leading up to the tariffs' implementation to avoid higher costs. Conversely, U.S. exports to Mexico totaled $29,362 million in March 2025, an interannual increase of 9.1%. Shipments from Canada reached $31,790 million (+3.4%), while those from China were $11,458 million (-10.3%), at annual rates.
With these results, Mexico remained the top trading partner of the United States, achieving a share of 14.6% (exports and imports) in the first quarter of 2025, surpassing Canada (13.3%) and China (9.1%). In March 2025, U.S. imports of goods from around the world amounted to $342,603 million, reflecting an interannual growth of 32.2%. In contrast, total U.S. exports amounted to $190,974 million in the same month, marking a 6.5% increase over March 2024.
Notably, exports to the United States from Europe grew at an interannual rate of 80.9% in March, reaching $113,480 million. As part of the backdrop, the Mexican Institute of Finance Executives (IMEF) highlighted the significant slowdown of the U.S. economy. Preliminary figures show that the U.S. economy contracted 0.3% in the first quarter of 2025 (annualized data), down from 2.4% in the previous quarter. "Undoubtedly, as the U.S. economy wavers with the possibility of a recession, the Mexican economy will face a significant obstacle in the coming quarters," said IMEF.
The United States is the destination for around 83% of all exports of products from Mexico, and there is a growing shared production between the two countries, particularly in the manufacturing industry. Intermediate goods have become key players in this relationship. Many parts manufactured in the United States are exported to Mexico, and finished products return across the border. As a result, the border region has become a crucial production hub. Moreover, U.S. manufacturing industries, such as automotive and electronics, heavily depend on Mexican manufacturers. For instance, in the automotive sector, there are complex connections between suppliers and assembly plants in both countries.
Finally, according to an analysis by the U.S. Congress, many economists agree that these ties generate trade benefits. On July 1, 2020, the T-MEC replaced the North American Free Trade Agreement (NAFTA). Comprising 34 chapters and 12 supplemental letters, the T-MEC retains most provisions of NAFTA while introducing significant changes regarding market access for motor vehicles and agricultural products, investment norms, public procurement, intellectual property rights, labor rights, and the environment. The new agreement includes new provisions on digital trade, state-owned enterprises, intellectual property, and currency imbalances.
In March, the trade deficit of the United States expanded to a record level as businesses ramped up imports ahead of tariffs, dragging GDP into negative territory in the first quarter for the first time in three years. The trade gap rose 14%, reaching a record figure of $140,500 million, compared to the revised $123,200 million from February, according to the Bureau of Economic Analysis (BEA) of the Department of Commerce.
Economists surveyed by Reuters had predicted that the trade deficit would increase to $137,000 million from the previously reported $122,700 million in February. The broad tariffs imposed by President Trump, including an increase in tariffs on Chinese imports by an astounding 145%, fueled a rush by companies to bring goods in to avoid higher costs. While reciprocal tariffs with most U.S. trading partners were suspended for 90 days, tariffs on Chinese products took effect in early April, triggering a trade war with Beijing.
In March, imports soared 4.4%, hitting a historic high of $419,000 million. Imports of goods skyrocketed 5.4%, reaching a record of $346,800 million. Exports increased by 0.2%, totaling $278,500 million, also a historical record. Exports of goods grew by 0.7%, amounting to $183,200 million. The government reported last week that the trade deficit accounted for a record 4.83 percentage points of GDP in the previous quarter, causing the economy to contract at an annualized rate of 0.3%, marking the first decline since the first quarter of 2022. Economists expect that the surge in imports will diminish in May, potentially helping GDP rebound in the second quarter.
