Mexico’s Economy Stalls as Tariffs and Weak Investment Bite

Mexico’s economy faces a sharper slowdown than expected, according to recent data and analysis from the Center for Economic Studies of the Private Sector (CEESP). The country’s GDP grew just 1.5% in 2024, a marked drop from 3.3% in 2023.

In the first quarter of 2025, growth slowed to only 0.2%, the weakest pace since 2021. Private sector forecasts now expect real GDP growth of just 0.5% for 2025, reflecting a consensus that the economy is losing momentum.

Several factors drive this downturn. The United States imposed 25% tariffs on Mexican goods in March 2025, disrupting trade flows and raising costs for exporters. These tariffs hit a wide range of products, including those previously covered by the USMCA agreement.

The move has already triggered retaliatory measures and heightened uncertainty for manufacturers and investors. Mexico sends about 80% of its exports to the U.S., so these trade barriers have a direct and immediate impact on industrial output and employment.

Investment remains weak. President Claudia Sheinbaum’s administration launched the ambitious Mexico Plan in January 2025, aiming to position Mexico among the world’s top ten economies and boost investment to 28% of GDP by 2030.

Mexico’s Economic Outlook

The plan targets 1.5 million new jobs in specialized manufacturing and seeks to raise domestic content in key sectors such as automotive, aerospace, and semiconductors. However, the plan’s effects will not materialize quickly.

Investors remain cautious, citing legal uncertainty and concerns about the reliability of supply chains. Domestic demand has stagnated. Formal job creation in early 2025 was the lowest for a first quarter since 2013, excluding the pandemic.

Only 16,850 formal jobs were added in March, far below what is needed to absorb new entrants to the labor force. Over half of Mexican workers remain in informal employment, limiting their access to social protections.

Inflation remains above target, with consumer prices rising 3.9% year over year in March 2025. The peso has stabilized near 20.20 to the dollar, but exports and remittances have declined.

The government’s growth targets appear increasingly out of reach as external and internal pressures mount. Mexico’s economic outlook remains subdued.

Without a significant improvement in investment and trade relations, the country risks further stagnation and missed opportunities in global supply chains.