Amid the likely implementation of tariffs by the United States and Mexico’s strong economic dependence on the world’s largest economy, Mexico will be the most affected economy in Latin America. The impact would be so significant that its GDP could grow only 0.6% in 2025, according to Moody’s Analytics, through its Director of Economic Analysis for Latin America, Alfredo Coutinho.
Moody’s Analytics indicates that the impact on the Mexican economy would mainly result from a slowdown in the volume of exports and imports in the coming months. This would be a natural consequence of a deterioration in Mexico’s trade relationship with its main commercial partner due to a protectionist economic policy like the one U.S. President Donald Trump plans to implement.
“As a result, we estimate that the Mexican economy would lose around one percentage point of growth in 2025. Therefore, we expect the country to grow only 0.6% this year. Without a doubt, it will be the most impacted country in Latin America,” said Coutinho.
Impact of Tariffs: A Multiplier Effect
The imposition of tariffs by Trump, scheduled for February 1, unless negotiations between the two nations prevent them, would have a multiplier effect on the Mexican economy, making their consequences even more significant.
“In addition to affecting foreign trade, tariffs could lead to higher inflation and currency depreciation, which in turn would force the central bank to tighten its monetary policy to counteract these effects,” said Coutinho.
Moreover, an additional economic impact of the tariff imposition would be on investment flows and the arrival of foreign companies to Mexico, a phenomenon known as nearshoring, due to rising production costs.
“The tariff and protectionist policy of the U.S. government will have an effect on investment flows resulting from the relocation of companies, not only from the United States but also from other parts of the world, particularly Asian companies looking to enter the Mexican market,” he explained.
Additionally, new investments were already under threat due to recent constitutional reforms in Mexico, particularly the Judicial Power reform and the elimination of autonomous agencies, which weaken the checks and balances in the country’s governance.
Latin America Will Hold Strong
Despite the risks and uncertainties posed by the new U.S. policies, Alfredo Coutinho acknowledged that the Latin American economy is in a good position to face 2025.
Coutinho highlighted that countries such as Peru, Brazil, Uruguay, Chile, Colombia, and Mexico led the advancement of the Latin American economy during 2024. “Mexico’s case was significant because it went through another year of slowdown, but this was not surprising due to the change in government,” he noted.
Moody’s Analytics forecasts that Latin America will grow 2.1% in 2025, with Argentina leading the region with an expected GDP growth of 3.9%—a very positive outlook considering the country’s long history of economic slowdowns and recessions over the past decades.
