Only a couple of years ago, manufacturers were fighting for space to relocate their operations to Monterrey, an industrial city in Mexico’s northeast, as they sought to move closer to the US and its vast consumer market. These days, real estate agents are offering flexible rental plans to keep businesses in the area.
According to Bloomberg, Mexico’s aim to grow rapidly by attracting foreign investment and boosting exports to the US had begun to falter even before Donald Trump returned to the White House. Now, the entire nearshoring plan risks collapsing if the US president follows through on promises to hammer Mexican goods with steep tariffs.
“Uncertainty reigns here,” said Mario Galindo, the commercial head of Prommont, which manufactures large crates and platforms to help companies ship their products. The firm, which serves clients in the US and Mexico, is forgoing price hikes and cutting profit margins to keep customers.
“I don’t think we are going to have tariffs, but we can’t know,” Galindo said. “To be able to invest, we need certainty.”
The sudden shift in outlook for Latin America’s second-largest economy not only clouds President Claudia Sheinbaum’s five-month-old government but also signals a missed opportunity for Mexico to break free from decades of sluggish growth.
Between 1980 and 2022, the gross domestic product expanded just above 2% a year on average, according to the World Bank. A wave of nearshoring investment fueled economic growth of over 3% in 2022 and 2023, leading many investors to believe Mexico was entering a sustained period of even higher expansion — one that could enable it to consistently outpace Latin American peers for years to come.
When Sheinbaum took office in October, Mexico’s economic prospects were already deteriorating. Growth estimates for 2025 had fallen to less than 1% as investors anticipated budget cuts needed to fix a growing fiscal deficit she’s inherited. Then came Trump threatening 25% tariffs on Mexico should it fail to stop the flow of migrants and drugs across the shared border.
Amid intense negotiations, the deadline for implementing those tariffs was delayed by one month to March 4. But even if Mexico eventually avoids them, the uncertainty they create may be enough to tip the economy into recession.
“Maybe nothing will happen, but we don’t know,” said Alberto Ramos, chief Latin America economist at Goldman Sachs Group Inc. “Just that anxiety until that process is resolved is already impacting the economy. We think that the trade policy uncertainty is reducing growth in Mexico by 0.5 to 1 percentage point.”
CLICK HERE TO READ THE FULL ARTICLE ON BLOOMBERG
TYT Newsroom
The post Mexico’s Economy Crumbles Under Donald Trump’s Tariff Threats first appeared on The Yucatan Times.