The economic situation of Mexico has recently taken center stage, raising concerns about its performance and the potential impacts of political relations with the United States. President Claudia Sheinbaum stated this week her government does not believe President Donald Trump’s threats of imposing 25% tariffs on Mexican imports, yet the administration is nonetheless "prepared" for any eventualities. Her remarks came during challenging economic times as signs show Mexico's economy is losing momentum.
The Mexican economy grew by only 1.3% throughout 2024, significantly down from over 3.2% growth recorded the previous year. This drop marks the first notable slowing of growth since the economic expansion observed post-pandemic recovery. Recent data from the National Institute of Statistics and Geography (INEGI) revealed troubling trends: the GDP experienced its first decline since 2021, decreasing by 0.6% in the last quarter of 2024.
The significance of this downturn cannot be overstated. Agricultural activities dropped by 8.9%, and secondary sectors, which include manufacturing, grew just 0.1%. Services and commerce reported only modest gains of 2.2%. These statistics move Mexico closer to the specter of recession; types of economic performance the current government must navigate amid looming trade pressures from the US.
During the recent Annual General Assembly of the American Society of Mexico, Economist Secretary Marcelo Ebrard expressed optimism about reaching accords with the US, highlighting the success of the US-Mexico-Canada Agreement (T-MEC). Ebrard lauded the trade pact as "a phenomenal success story" and cited impressive growth stats. According to him, T-MEC has facilitated a 37% increase in trade and investment, underscoring the mutually beneficial nature of the trade relationship.
Despite Ebrard’s positive outlook, the political backdrop remains tense, particularly with Trump's administration signaling potential tariff enforcement. Trump reiterated his proposal on January 21, 2025, stressing he will impose tariffs on imports from Mexico and Canada starting February 1. Such measures could spiral negatively for all involved nations, with analysts warning of severe repercussions for trade dynamics.
Mexican analysts are closely monitoring these developments, particularly as they might influence the economy moving forward. Financial institutions like Banamex have voiced concerns, projecting continued economic weakness with estimates for just 0.2% growth for 2025. With the prospect of Trump’s tariffs looming, the risks associated with this forecast are alarming. Banamex noted, "The main risks to this estimate relate to Trump's administration policies, particularly on tariffs." The general sentiment appears to echo cautiousness among the business community.
Gabriela Siller, the director of economic analysis at Banco Base, elaborated on the potential downslide, stating, "The data places the country near recession; a deceleration is expected to continue." This apprehensive outlook points to pressing challenges faced by Sheinbaum’s government as they navigate these complex dynamics.
On the market front, the Mexican peso exhibited slight appreciation following the release of GDP figures, hitting approximately 20.50 pesos per dollar. This movement, albeit minimal, reflects market responses to the overall economic indicators for both Mexico and the US. Analysts noted this may be temporary, considering the broader economic distress, coupled with the potential instability due to external political factors.
The Mexican economy, undeniably interlinked with US policies and relations, finds itself at crossroads as it faces both internal and external pressures. With tentative strategies in place from the Sheinbaum administration, including engaging diplomatically with the US to fend off damaging economic policies, the coming months will prove integral to determining the country’s economic resilience.
Significantly, the completed report on GDP will be disclosed on February 21, which could reshape the current discourse surrounding Mexico's economic strategy. Future negotiations and the handling of Trump's tariffs will rightly command the attention of economic stakeholders concerned with the nation's financial health and political stability.
While Mexico’s economy has faced noticeable setbacks, the determined resolve from leaders like Ebrard and Sheinbaum to collaborate through channels like the T-MEC and preparations against tariffs reflects lessons learned from past trade relationships. Yet, how effectively these strategies translate to tangible economic recovery remains the overarching question with high stakes for the Mexican nation moving forward.