Our economic outlook for Mexico

We recently revised our 2025 GDP growth forecast for Mexico to below 1% due to headwinds from trade developments and the uncertainty surrounding trade policy, which are affecting business investment and manufacturing employment. The Bank of Mexico (Banxico) cut the overnight interbank rate by 50 basis points to 8.5% on May 15, citing increased global risks amid escalating trade tensions and stable inflation. We expect the rate to end 2025 from 8% to 8.25%.

The recent announcement of U.S. tariffs on the Mexican automobile sector is particularly significant, given that sector’s importance to the Mexican economy. The automotive industry accounts for about 4% of Mexico’s GDP and employs approximately 1 million workers. Despite these challenges, the potential for U.S.-Mexico trade negotiations to occur relatively soon could mitigate some of the adverse effects.

Additionally, Mexico may benefit from high U.S. tariffs on Chinese imports. This situation could create upside potential for growth as Mexico positions itself as an alternative manufacturing hub, leveraging its strategic location and skilled workforce. The evolving trade landscape offers both challenges and opportunities for Mexico’s economy in the coming year.