Trump tariffs could stall Mexico’s growth: Fitch

: Crude oil, Metals, Oil products
25/01/23

US President Donald Trump's threat to impose tariffs on imports from Mexico could have a serious impact on Mexico's already sluggish economic growth in 2025, Fitch Ratings said.

"Our assumption is that Trump will follow through on some tariff threats," said Todd Martinez, senior director of sovereigns at Fitch Ratings, during a webinar. But potential 25pc tariffs would likely apply only to durable goods, which account for about 10pc of Mexico's exports to the US, thanks to protections under the US-Mexico-Canada (USMCA) trade agreement that are likely to protect oil exports, he added.

Fitch forecasts Mexico's economy to grow by just 1.1pc in 2025. But this estimate does not include the potential impact of tariffs, even if limited. Should they be implemented, these tariffs could shave 0.8 percentage points off GDP growth, potentially pushing the economy into near-zero growth or a contraction, Martinez said.

The uncertainty surrounding the scope, timing, and duration of the tariffs adds to the economic risks. "These tariffs may also serve as a negotiation tool for broader bilateral issues," noted Shelly Shetty, managing director of sovereigns at Fitch Ratings.

Exports to the US represent over 25pc of Mexico's annual GDP growth. Additionally, Mexico is home to the largest undocumented population in the US, at around 4.8mn individuals, according to Fitch.

While Trump's return to the White House could disrupt Mexico's economy, domestic challenges also threaten growth. Martinez highlighted the judicial reform passed late last year, which will overhaul the judiciary by introducing popular elections for judges and supreme court justices between 2025 and 2027. This reform has already raised concerns among global investors.

Mexico's governance index has worsened between 2012 and 2023, according to the World Bank. Fitch also noted that the ruling party Morena's supermajority in congress could further alarm international investors by introducing policies perceived as unfavorable to business.

Fitch currently has Mexico's sovereign credit rating at BBB-, its lower medium investment grade, with a stable outlook.

By Édgar Sígler

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25/02/11

Mexican steel faces few outlets in wake of US tariffs

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California aims to expand alternative bunkers

25/02/11

California aims to expand alternative bunkers

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Trump steel tariffs end exclusions, expand scope

25/02/11

Trump steel tariffs end exclusions, expand scope

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Brazil’s January inflation lowest since 1994

25/02/11

Brazil’s January inflation lowest since 1994

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Petrobras considers India for crude: CEO

25/02/11

Petrobras considers India for crude: CEO

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