US Trade Policies Push Mexico Toward Recession: Fitch Ratings

Uncertainty surrounding US government policies, particularly in trade, is exerting pressure on Mexico’s economy and may contribute to a recession this year, reported Fitch Ratings. Todd Martínez, Co-Head of the Americas Sovereign team, Fitch, noted that the indirect effects of slower growth in both the United States and China, Mexico’s main trading partners, combined with ongoing tariff uncertainty, are weighing heavily on Latin America.

“However, the impact has been especially severe for Mexico, the country most exposed to the United States, where sector-specific tariffs have already been implemented. Meanwhile, economic data and forecasts for other parts of the world have remained relatively resilient,” Martínez explained.

Fitch forecasts a -0.4% contraction in Mexico’s GDP for this year, while it expects the broader Latin American region to grow by 2.1%, in line with 2024 figures. The report attributes this regional stability to Argentina’s recovery, which helps offset slower growth in Brazil and the expected recession in Mexico.

Trump’s Tariffs Could Weaken Latin America’s Economy

The analysis highlights that most Latin American economies face at least a 10% reciprocal tariff from the United States. In Mexico’s case, although the country is especially vulnerable, Fitch believes that “the impact could be partially offset by relatively more favorable tariff treatment compared to other regions.”

Martínez also pointed to US immigration policy as another risk for the region. However, deportation rates have not surged significantly, and remittance flows remain strong.

“Prudent policy frameworks and strong external positions and reserves should help most Latin American sovereigns manage these risks, despite limited room for counter-cyclical measures. The inflationary consequences of US policies could lead the Federal Reserve to maintain higher interest rates for longer, which would have ripple effects across the region,” the report concluded.