Mexico’s Economy Grows Slightly in May Amid Trade and Debt Challenges

Mexico’s economy grew by 0.1% in May 2025, according to the country’s official statistics agency, INEGI. This modest increase follows two months of stagnant or slightly declining economic activity, highlighting ongoing difficulties for Mexican businesses and workers.

A key factor in this slow growth is new tariffs imposed by the United States, which purchases about 80% of Mexico’s exports. These tariffs raise costs for Mexican steel, aluminum, and automobiles, particularly with a 25% tariff on cars not meeting USMCA trade deal rules.

The auto industry, a cornerstone of Mexico’s economy, faces higher costs and uncertainty about future sales. Weak domestic consumption and reduced business investment further contribute to the slowdown.

Mexico’s central bank now expects the economy to grow by 0.1% in 2025, significantly below the government’s forecast of 1.5–2.3%. Private analysts largely align with the central bank, projecting growth below 1%.

Mexico’s Economic Struggles Amid Inflation and Fiscal Pressure

In 2024, the economy grew by approximately 1.2%, down from 3.3% in 2023, reflecting a broader trend of decelerating growth. Domestically, cautious consumer spending and low business investment exacerbate the slowdown.

Inflation, estimated at 4.4% in May 2025, remains above the central bank’s 3% target range (2–4%). To stimulate growth, the central bank has cut interest rates to 8.5%, but these measures have had limited impact so far.

Mexico’s public debt has risen to about 50.8% of GDP, the highest in recent years, with interest payments constraining government spending on programs and business support. This fiscal pressure limits Mexico’s ability to counter economic challenges.

As a major trading partner for the United States and Canada, Mexico’s slowdown affects North American supply chains and prices for goods. Mexican businesses now face tough choices: raising prices, cutting jobs, or seeking new markets to offset tariff impacts.