Mexico entering technical recession amid tariff war with Trump
/ Our Today
administrator
Mexico is now entering into a technical recession with signs that the economy is expected to contract in the first quarter due to US President Donald Trump’s fluctuating tariffs, which have disrupted already weakening growth.
The Mexican economy experienced its first quarterly gross domestic product slump since the pandemic in late 2024. The anticipated first-quarter contraction would confirm a technical recession, defined by two consecutive quarters of negative growth.
Trump’s tariff threats have compounded issues from last year’s drought, and investors are concerned about judicial overhauls and the ruling Morena party’s unchecked power. Analysts like Marco Oviedo from XP Investments believe the damage is done with a slight recovery possible in the second quarter.
Forced to cut spending
Despite high approval ratings, Mexican President Claudia Sheinbaum faces economic challenges and was forced to cut spending due to the largest budget deficit since the 1980s. A technical recession might pressure her to consider fiscal reform, though she insists significant changes aren’t needed.
Trump recently imposed 25% tariffs on all imports from Mexico and Canada with a temporary reprieve for United States-Mexico-Canada Agreement (USMCA) compliant goods. Sheinbaum expects these exports to remain exempt, aiming to increase compliance to 85-90%.
However, Trump’s inconsistent tariff policies have left businesses uncertain. Economists warn of increased recession risks for the US, Mexico, and Canada due to the uncertain future of USMCA.
Mexico’s GDP contracted by 0.6% in the fourth quarter with full-year growth at 1.2%. Despite this, Sheinbaum launched a plan to boost investment and local manufacturing.
However, Mexico’s Central Bank Deputy Governor, Jonathan Heath is arguing that it is premature to declare a recession, acknowledging the current stagnation the country is now in. Mexico’s central bank halved its 2025 GDP growth forecast to 0.6% while the Finance Ministry maintains a 2 to 3% growth forecast.
Fitch Ratings warned that a 25% tariff could push Mexico into recession and affect its “BBB-” rating, suggesting fiscal reform might be necessary to counter economic challenges.
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