Mexico finds itself at a crossroads as it navigates the complex landscape of international trade and tariffs imposed by the United States. Following the announcement by former President Donald Trump of tariffs affecting over 60 countries, Mexico has emerged as a surprising beneficiary, gaining a relative advantage over Asian manufacturing rivals. This shift comes amidst significant economic implications that could reshape supply chains and consumer prices across the board.
On April 15, 2025, it was reported that Trump’s tariffs, which typically result in a 4 percentage point increase in consumer prices for every 10 percentage point hike, have placed immense pressure on global markets. While a temporary 90-day pause was announced for certain reciprocal tariffs, a baseline 10% tariff on most imports to the U.S. remains intact. Notably, products such as smartphones, computers, semiconductors, solar cells, and memory cards have been exempted from these tariffs. For countries like Vietnam, which previously faced a 46% reciprocal tariff, the new 10% rate represents a significant reduction.
In a notable development, both Mexico and Canada have been exempted from these new tariffs, a decision that has been welcomed by Mexican officials. Marcelo Ebrard, Mexico’s Secretary of Economy, confirmed via social media that the country is not included in the latest round of tariffs. However, the 25% tariff on imports from Mexico and Canada not covered by the T-MEC agreement remains in place, alongside tariffs on steel and aluminum.
According to the Economic Research Department of Banamex, Mexico is in a better position than many Asian countries, which are now facing the brunt of the new tariff percentages. Countries like Indonesia and China, previously strong competitors for Mexican manufacturers, are now at a disadvantage due to the increased tariffs imposed on their exports. Analysts believe that while the tariffs may reduce Mexico's competitiveness against U.S. producers, they enhance Mexico's standing against the rest of the world.
Devan Kaloo, an investment manager at Aberdeen Investments, highlighted that Mexico's exclusion from the 10% universal tariff will help maintain its competitive edge in global trade. He noted, "The U.S. labor market will not be able to manufacture low-end products that can replace Chinese goods in supply chains," indicating that many U.S. brands may turn to Mexico for production. With a population of 133 million, Mexico offers a labor force with wages that are significantly lower—up to four times less than comparable positions in the U.S.—making it an attractive destination for industries requiring labor-intensive manufacturing.
Moreover, nearly 80% of U.S. fresh vegetable imports come from Mexico and Canada, which remain exempt from the tariffs. This exemption underscores the importance of proximity in maintaining the quality of perishable goods. Kaloo further emphasized that the integration of the U.S. and Mexican economies has strengthened since the COVID-19 pandemic disrupted supply chains, leading to a more robust industrial relationship.
Despite these advantages, experts warn that the current tariff measures could lead to slower economic growth and potential layoffs in the long term. Arantza Alonso Berbotto, a senior analyst at Verisk Maplecroft, expressed concern that while Mexico may not be as adversely affected as other nations, the tariffs could stifle significant investments and sustained growth. She pointed out that Mexico's tariff should ideally be zero due to its free trade agreement with the U.S. and Canada, yet it currently is not.
As the T-MEC agreement is set to be reviewed in 2026, the Mexican government is keenly aware of the need to maintain a strong trade relationship with the U.S. and Canada. Claudia Sheinbaum’s administration is preparing for negotiations with Trump, emphasizing that a tariff war would ultimately be detrimental to all parties involved. The stakes are high, as the outcome of these negotiations could have far-reaching consequences for many Mexican factories and their employees.
In a related development, Mexican authorities have raised concerns about irregularities in chicken and pork imports from the U.S., which they claim disadvantage local producers. Julio Berdegué Sacristán, Secretary of Agriculture and Rural Development, noted that U.S. chicken is often sold below market value in Mexico, a situation that has prompted the government to consider reactivating antidumping measures. Furthermore, the U.S. announced a new tariff on tomatoes from Mexico, which will take effect on July 14, 2025, adding another layer of complexity to the trade relationship.
As Mexico grapples with these challenges, the IMEF (Mexican Institute of Finance Executives) has warned that the country risks losing its investment grade by 2026 if the fiscal situation and trade relations deteriorate. Currently rated BBB- by Fitch with a stable outlook, Mexico’s credit rating is closely tied to its ability to maintain strong economic growth and a solid relationship with the U.S. and Canada. The IMEF president highlighted that a combination of fiscal deterioration and a strained trade relationship with the U.S. could increase the risk of losing this critical rating.
In conclusion, while Mexico finds itself in a relatively advantageous position amid the ongoing tariff disputes, the path forward is fraught with uncertainty. The government must navigate complex negotiations and address domestic concerns to ensure that the benefits of its current standing translate into long-term economic stability and growth.
