The economic outlook for Mexico has taken a dire turn, with the Organisation for Economic Co-operation and Development (OECD) predicting significant declines due to the intensifying trade war initiated by former President Donald Trump. On March 17, 2025, the OECD published its latest economic report, forecasting Mexico's GDP to plummet by 1.3% this year.
These somber projections exacerbate concerns about the impacts of the U.S. tariffs on Mexican imports, particularly the existing 25% tariffs imposed on steel and aluminum. The ripple effects extend to the entire North American region, with Canada also grappling with downgraded growth expectations. According to the OECD, Canada’s growth has been reduced by over one percentage point, leaving it at just 0.7% for both this year and next.
Notably, the report indicates the U.S. itself will not emerge unscathed, with its growth reduced to 2.2% for 2025 and falling to 1.6% the following year. The OECD outlined, “A deceleration of growth is anticipated as tariff increases take effect, particularly affecting Mexico and Canada due to their high trade exposure with the U.S.”
Looking at the global stage, economic activity is predicted to grow by 3.1% this year and then decrease to 3% by 2026. This disappointing outlook highlights the economic challenges stemming from geopolitical tensions and increased protectionist measures. The report, aptly titled "How to Navigate Through Uncertainty," signals the potential for the global economy to edge toward uncharted waters.
The Eurozone, similarly, faces obstacles, with only 1% growth anticipated this year. Germany is forecasted to be the laggard, with GDP growth of just 0.4% in 2025, rising to 1.1% the following year. Conversely, Spain has emerged as the standout performer among European economies, expecting 2.6% growth due to less exposure to trade conflict.
Among Latin American countries, Argentina is showing promising signs, projected to exit recession with growth hitting 5.7% this year. Brazil, on the other hand, will experience slower growth, with estimates falling to 2.1% for 2025 and just 1.4% for 2026.
Alongside these economic forecasts, rising inflation remains another risk factor. Although global prices show a downward trend compared to the peaks of two years ago, they still exceed earlier projections. Inflation within the G-20 group is expected to decrease from 3.8% to 3.2% by 2026, but this minor decline does little to alleviate pressure on central banks. The OECD warned, "If pressured by increasing inflation, economic slowdowns may become even more pronounced.""
For Mexico, the OECD forecasts inflation will rise by 4.4% this year and continue at 3.5% the following year, indicating persistent price pressures tied to trade tensions. The same inflation rate of around 3% is anticipated for Canada and slightly lower for the U.S. Argentina’s economic improvements may be offset by soaring inflation as price increases remain near 30%. Meanwhile, Brazil is expected to experience inflation of over 5% through 2025.
Warnings of dire economic conditions are echoed by financial institutions like UBS and Banamex. UBS predicted, “The intermittent tariffs from Trump are undermining investor confidence, which could leave Mexico on the brink of recession.” Meanwhile, Banamex offered stark predictions about the dire consequences if tariffs last for over one year, projecting falls as severe as 2.4%.
Moody’s Local has also contributed to the grim sentiment, expecting tariffs on Mexican exports to begin this second quarter, which will weigh heavily on the nation’s economic stability. Despite this, the Secretary of Finance, Edgar Amador Zamora, asserted, “We will maintain efforts to meet our growth target amid adversities,” maintaining the government’s optimistic stance with predictions for 2.3% growth this year.
Whether through optimism or realism, the current economic forecast serves as both a call to action and cautionary tale for policymakers and investors alike. The interplay between tariffs and economic resilience will determine Mexico's standing not only within North America but as part of the broader global economy as it copes with rising inflation and potential recessionary effects.
