Uncertainty over US tariffs is already hurting the Mexican economy, with new forecasts downgrading Mexico's 2025 growth outlook.
In its Interim Economic Outlook, the OECD said it now expects a recession in Mexico this year with gross domestic product (GDP) contracting 1.3pc in 2025 — sharply revised from the 1.2pc growth expected in its December outlook report. The multilateral also lowered its 2026 estimate for Mexico to 0.6pc growth from 1.6pc.
The OECD forecast assumes the continuation of US 25pc tariffs on steel and aluminum as well as the 25pc blanket tariff on all Mexican goods — both enacted this month. It also assumes a one-month exemption on exports compliant with the USMCA free trade agreement to be terminated 2 April, as well as reciprocal tariffs imposed by Mexico and Canada.
Despite the treaty exemption, roughly half of current Mexican exports are still subject to the tariffs, said Victor Herrera, the head of economic studies at Mexican finance executive institute IMEF.
IMEF lowered its own 2025 GDP growth outlook for Mexico to 0.6pc in its March survey from 1pc in the previous month and revised the 2026 estimate to 1.6pc growth from 1.7pc last month.
IMEF said the reduced growth outlook reflects the trade uncertainty over tariffs as well as negative investor sentiment on recent Mexican reforms to the judiciary and independent regulators, among other issues.
Herrera noted the OECD used one of several scenarios being reviewed, some of which could push growth even lower for Mexico, including a Brookings Institute study predicting a 3pc contraction in Mexico.
IMEF is holding off on any accounting of prolonged tariffs "until we know what reality we are facing in April."
The IMEF held its estimate for year-end inflation at 3.9pc in the March survey, unchanged from February, holding off on adjustments due to tariffs until the picture clears in April.
As such, the group also sees the central bank continuing the current cycle of cuts to its target interest rate, currently at 9.5pc. IMEF lowered its forecast for the year-end rate to 8.25pc in the March survey from the previous estimate of 8.5pc.
All 38 bank analysts in a 5 March survey conducted by Citigroup expect the central bank to cut the rate a half-point to 9pc when it meets 27 March.
The IMEF lowered its 2025 formal job creation estimate to 250,000, marking a third month of declines from the 350,000 jobs forecast in December.
The peso's year-end exchange rate forecast showed the peso depreciating to Ps21.00/$1 by the end of the year compared with Ps20.90/$1 from the prior forecast.
By James Young
