Our economic outlook for Mexico

Mexico’s economy has demonstrated resilience in 2025 despite considerable trade uncertainty with the United States. Real GDP growth exceeded expectations in the first half of the year, but headwinds have gathered in the second half in the form of lackluster private investment and a cautious domestic consumer. While uncertainty surrounding trade and the 2026 United States-Mexico-Canada Agreement (USMCA) review weighs on consumer and business sentiment, we expect a modest boost in the coming quarters as Mexico prepares to cohost the world soccer championship tournament in the summer of 2026.

Longer-term growth prospects remain constructive. Nearshoring trends are reinforcing Mexico’s role as a key North American manufacturing hub. Competitive labor costs, geographic proximity, and deep structural integration with U.S. industry position Mexico favorably for the future. Mexico retains a competitive edge under the USMCA, with roughly 82% to 85% of its exports to the U.S. duty-free, keeping its effective tariff rate near 8%, among the lowest globally.

On the monetary front, the Bank of Mexico (Banxico) on November 6 cut its policy rate by 25 basis points to 7.25%, emphasizing downside risks from a slowing global economy and confidence that headline inflation would gradually converge to target in 2026. We expect one more quarter-point cut this year, followed by another cut in early 2026 before Banxico pauses amid sticky core inflation and global economic downside risks abating.