Mexico Faces Trade Headwinds but Barclays Sees Medium-Term Resilience

Barclays projects that Mexico will navigate current trade tensions with the United States and emerge in a stronger position over the medium term.

This assessment comes as the country faces a slowdown, with hard data showing Mexico’s GDP growth forecast for 2025 cut sharply by both private analysts and the central bank.

The most recent surveys place expected growth at just 0.2% to 0.6%, a steep drop from 1.5% in 2024. These downgrades reflect direct concerns over U.S. tariffs and the uncertainty of ongoing negotiations around the USMCA trade agreement.

The U.S. has threatened sweeping new tariffs, and Mexico’s government has responded with a mix of negotiation and preparation for possible reciprocal measures. The risk of tariffs now affects roughly half of Mexico’s exports.

This uncertainty has led to a marked reduction in both public and private investment, while consumption has also slowed. The Mexican peso has remained relatively stable, and inflation expectations for year-end 2025 have edged down to about 3.7%.

The central bank has responded by cutting its key interest rate to 9%, with further reductions likely if inflation continues to ease. Manufacturing exports, a core pillar of Mexico’s economy, have already declined, contributing to a trade deficit of $4.56 billion in January 2025.

Recession Fears Rise Amid Trade Tensions

The finance executive association IMEF now warns that a recession is likely, with two consecutive quarters of negative growth possible if trade tensions persist.

Sectors like construction are already under pressure, and job creation forecasts for 2025 have dropped to 220,000 from 280,000. Despite these challenges, Barclays maintains a constructive view on Mexican equities, estimating a 25% upside.

The bank points out that Mexican stocks currently trade at a significant discount, and that market sentiment remains cautious but not panicked.

Barclays credits President Claudia Sheinbaum’s measured approach for helping to avoid immediate tariff escalation, though the negotiation process remains fraught.

The real story is that Mexico’s economic outlook hinges on the outcome of USMCA negotiations and the duration of tariff threats. The country’s deep integration with U.S. supply chains and its willingness to negotiate provide reasons for cautious optimism.

However, until a durable agreement is reached, the risk of recession and further economic pain remains real. All figures and statements in this article reflect verified, factual information as of April 2025.

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