The One Big Beautiful Bill’s Impact on Mexico’s Energy

President Donald Trump has signed its tax and spending package, which he deemed as “One Big Beautiful Bill,” into law. This package further sets Trump’s vision and plans for the US economic policy and guidance across several industries, with significant impact in global trade.

Trump’s economic and global trade policy has been characterized by a protectionist approach, seeking to leverage the United States’ spot as a top market and bringing production chains to the United States. An important component of this bill includes his vision for the future of the oil and gas and energy industries.

According to Trump, the United States must pursue reciprocity in global trade and “restore national and economic security.” To achieve this, Trump declared a state of national emergency. To shift the dynamics of US economic and trade practices, the president has resorted to the imposition of tariffs, which has created an environment of high uncertainty.

Energy policy is crucial for Trump’s national security strategy. Trump, who has criticized and dismissed the global effort to pursue an energy transition, considers a necessity to keep investing in the oil and gas sector and scale back on renewable energy deployment. The bill supports traditional fossil fuels such as oil, natural gas, and coal, aligning with Trump's past policies that prioritized domestic production and deregulation to achieve "energy abundance." This includes accelerating permitting for energy projects on federal lands and potentially expanding offshore leasing.

This bill strengthens fossil fuel development and curtails environmental regulations. Key provisions include immediately resuming quarterly onshore and offshore oil, gas, and coal lease sales with reduced royalty rates, expediting permitting for natural gas pipelines in places like Alaska, and mandating new lease sales in sensitive areas like the Arctic National Wildlife Refuge (ANWR) and the Gulf of Mexico.

The bill also targets the clean energy market by rolling back tax credits and incentives established under the previous administration's Inflation Reduction Act. This includes cuts to incentives for domestic and utility-scale solar power, as well as the Clean Electricity Production Credit. It also axes the Domestic Content bonus, which encouraged the use of US-made components in renewable projects. While some earlier proposals, like an excise tax on renewable energy, were removed during Senate proceedings, the bill's overall thrust is seen by critics as undermining the growth of the wind and solar industries and potentially leading to higher utility bills for American consumers.

US Energy Policy on Mexico

Since trade negotiations between Mexico and the United States have been tied to political issues, such as immigration and drug trafficking, energy investment trends have become more uncertain. While the ongoing US-China trade war continues to prompt the diversification of supply chains away from China, the US' scaling back of renewable energy incentives, as seen in recent legislation, could diminish the appetite for cleaner energy investments in North America. This contrasts with China's continued, substantial investment in renewables, potentially eroding US competitiveness. Nonetheless, tariffs continue to undermine the solar industry in Asia making it more urgent to seek the relocation of supply chains for the renewable sector.

In light of increasingly disrupted supply chains, Mexico could still attract investments under the umbrella of nearshoring, as long as it can “win over investor confidence.” Moreover, regarding the natural gas market, continued US focus on maximizing natural gas production and exports could potentially lead to a stable or even lower price environment for US natural gas flowing into Mexico. This could benefit the country in the short term. However, some analyses have warned about the potential for the US to impose export taxes on natural gas to Mexico, which could increase costs for Mexican consumers and reduce the competitiveness of Mexican exports.

While an increased focus on fossil fuels from the United States could lower refined products prices for Mexico, the threat of tariffs could actually increase them for both the United States and Mexico, with the latter facing the highest prices. Considering that the United States still imports 70% of crude oil from Mexico and Canada, the possibility of more tariffs would ultimately affect both countries.