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LATIN AMERICA ADVISOR

LATIN AMERICA ADVISOR

A daily publication Of the dialogue

March 18, 2025

How Can Mexico Navigate Economic Headwinds?

Mexican President Claudia Sheinbaum has maintained high nationwide approval ratings amid economic uncertainty. She is pictured alongside supporters in early March. // File Photo: Mexican Government.

Q

  • Mexico’s economy in the first quarter is headed toward a technical recession, which is marked by two consecutive quarters of economic contraction, Reuters reported March 11, citing analysts. Mexico’s gross domestic product shrank 0.6 percent in last year’s fourth quarter as compared to the third, statistics agency INEGI said in February. The weak economic indicator comes amid uncertainty over U.S. tariffs. What are the strongest economic headwinds facing Mexico? How well are Mexico’s president, Congress and central bank addressing ongoing economic concerns, and what more should they do? Which industries in Mexico are most vulnerable to economic contraction?

A

Jonathan Heath, deputy governor of the Bank of Mexico: “The strongest economic headwinds facing Mexico at this moment are weak demand for exports stemming mostly from a stagnant U.S. industrial production, as well as an absence of investment related to extreme uncertainty. This year can be characterized by many risks and challenges, almost all coming from Trump’s erratic and unpredictable behavior. Not only are we facing the menace of a global tariff war with an obvious ‘lose-lose’ outcome, but also the pending renegotiation of the T-MEC agreement, which could conclude with the need for significant structural changes to the Mexican economy. The most vulnerable sector is by far the automotive industry. For the moment, the non-confrontational approach of the Mexican president seems to be…”

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