Mexico’s economy appears on track to contract in the first quarter, potentially plunging the country into a technical recession, as U.S. President Donald Trump’s fluctuating tariff policies disrupt growth that was already showing signs of weakness.
Analysts warn that the damage is already done. “The damage is already done, maybe there's a slight recovery in the second quarter, but this quarter is lost,” said Marco Oviedo, senior strategist for Latin America at XP Investments. The threat looms large following a steep quarterly GDP slump in the final months of 2024 – the first since the pandemic – which set the stage for two consecutive quarters of negative growth if Q1 results remain weak.
Trump’s tariff threats have compounded Mexico’s economic challenges, adding to the strain from a devastating drought last year, a controversial judicial overhaul, and concerns over the unchecked power of the ruling Morena party in Congress. These issues have left Mexico’s President Claudia Sheinbaum scrambling to rein in spending amid the nation’s highest budget deficit since the 1980s. A technical recession could renew pressure on her administration to implement fiscal reforms, though Sheinbaum insists that Mexico does not need sweeping changes even as she struggles to balance welfare programs with fiscal discipline.
Last week, Trump imposed 25% tariffs on all imports from Mexico and Canada, though he later offered a month-long reprieve on goods compliant with the USMCA. Economy Minister Marcelo Ebrard noted that about half of Mexican exports to the U.S. are currently USMCA-compliant, with plans to boost that figure to between 85% and 90% to avoid tariff impacts. Despite these measures, the outlook remains uncertain as frequent shifts in U.S. tariff policy have left businesses in a state of limbo.
Economists participating in Reuters surveys have highlighted the growing risk of recession not only for Mexico, but also for its North American trade partners, due to the uncertain future of the USMCA. Mexico’s GDP contracted at a seasonally adjusted 0.6% rate in the fourth quarter, while full-year growth was a modest 1.2%, signaling a deteriorating economic picture even before the current tariff threats emerged.
Deputy governor of Mexico’s central bank, Jonathan Heath, cautioned against premature declarations of a recession. “It is very premature to speak of a recession,” Heath told Reuters, though he acknowledged a period of stagnation driven largely by prevailing uncertainty. Heath expects declines in construction and parts of the manufacturing sector, but remains unsure if the slowdown will be widespread.
In February, Mexico’s central bank cut its forecast for 2025 GDP growth to 0.6% from an earlier 1.2%, while the Finance Ministry maintained a more optimistic outlook of 2% to 3% growth. Other economic indicators have also shown signs of strain, with gross fixed investment falling by 2.6% in December and private consumption dropping by 1.1%.
Fitch Ratings recently warned that a 25% tariff across the board could push Mexico into recession this year and jeopardize its “BBB-” credit rating if public finances deteriorate further. Analyst Ernesto Revilla, Citi’s chief economist for Latin America, summed up the sentiment: “We have to recognize the rules have changed. There is a new level of uncertainty in the North American region that, regardless of whether the tariffs don’t happen, will cause permanent damage because it's going to scare off investment.”
As Mexico grapples with these multiple economic headwinds, the potential for a technical recession underscores the deep challenges facing the nation amid volatile trade policies and domestic fiscal
China has issued a formal protest against the United States over recent remarks by Defence Secretary Pete Hegseth, accusing Washington of “vilifying” Beijing and promoting confrontation in the Indo-Pacific.
A Chinese military official on Saturday rejected U.S. allegations about Beijing’s regional behavior, accusing Washington of destabilizing the Asia-Pacific region.
U.S. Defense Secretary Pete Hegseth told Indo-Pacific allies Saturday they won’t be left alone against growing military and economic pressure from China—but they must also boost their own defense efforts.
Iran said on Saturday that it has officially received a new nuclear deal proposal from U.S. President Donald Trump, delivered by Oman during a diplomatic visit to Tehran.
The US Supreme Court has ruled that the Trump administration can temporarily end legal protections for more than 500000 migrants from Cuba, Haiti, Nicaragua, and Venezuela, exposing them to possible deportation.
Flash floods in central Nigeria have killed at least 151 people, with authorities warning the toll may rise further as search and rescue operations continue in the flood-ravaged town of Mokwa, Niger State.
A celebration of Turkish cuisine and friendship took place in Karachi on Sunday as the Turkish Consulate hosted a World Breakfast Day event, sharing traditional flavours with a distinguished Pakistani audience.
More than 500 people were arrested and two fatalities reported following chaotic celebrations across France after Paris Saint-Germain's historic Champions League victory, according to the interior ministry.
Wildfires in western and central Canada have triggered the evacuation of more than 26,000 people, with provinces including Manitoba, Saskatchewan and Alberta facing major threats.
Indonesian rescuers are continuing their efforts to locate eight people still missing after a quarry collapse in West Java left at least 17 dead and six injured, with authorities warning of ongoing landslide risks.
On May 28, the inauguration ceremony of Lachin International Airport was held.
Taxi drivers across France are protesting government plans to cut payments for driving patients to medical appointments. These cuts are part of a broader effort by Prime Minister François Bayrou to save €40 billion in the 2026 budget and reduce the country’s large deficit.
A car drove into crowds of Liverpool fans celebrating the club’s Premier League title in the city centre on Monday evening, injuring dozens including 4 children. A 53-year-old man believed to be the driver was arrested at the scene.
EU ministers have greenlit a massive €150 billion defense investment fund—dubbed the Security Action for Europe (SAFE)—as the bloc ramps up its military readiness in response to Russia’s aggression and growing uncertainty over U.S. security guarantees.
Brazil’s economy is expected to have regained momentum in the first quarter of 2025, driven by a surge in household spending and private investment, according to a Reuters poll of economists conducted from May 21–26.
Flash floods in central Nigeria have killed at least 151 people, with authorities warning the toll may rise further as search and rescue operations continue in the flood-ravaged town of Mokwa, Niger State.
More than 500 people were arrested and two fatalities reported following chaotic celebrations across France after Paris Saint-Germain's historic Champions League victory, according to the interior ministry.
Wildfires in western and central Canada have triggered the evacuation of more than 26,000 people, with provinces including Manitoba, Saskatchewan and Alberta facing major threats.
China has issued a formal protest against the United States over recent remarks by Defence Secretary Pete Hegseth, accusing Washington of “vilifying” Beijing and promoting confrontation in the Indo-Pacific.
Start your day informed with AnewZ Morning Brief: here are the top news stories for June 1st, covering the latest developments you need to know.
Flash floods in central Nigeria have killed at least 151 people, with authorities warning the toll may rise further as search and rescue operations continue in the flood-ravaged town of Mokwa, Niger State.
A celebration of Turkish cuisine and friendship took place in Karachi on Sunday as the Turkish Consulate hosted a World Breakfast Day event, sharing traditional flavours with a distinguished Pakistani audience.
More than 500 people were arrested and two fatalities reported following chaotic celebrations across France after Paris Saint-Germain's historic Champions League victory, according to the interior ministry.
Wildfires in western and central Canada have triggered the evacuation of more than 26,000 people, with provinces including Manitoba, Saskatchewan and Alberta facing major threats.
Indonesian rescuers are continuing their efforts to locate eight people still missing after a quarry collapse in West Java left at least 17 dead and six injured, with authorities warning of ongoing landslide risks.
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