2025 in Review: Plan Mexico, US Relations, New Tariffs

2025 was a year of ambitious economic initiatives and international pressures for Mexico, marked by the launch of Plan México, the country’s first judicial elections, and ongoing trade and diplomatic challenges with the United States. 

On Jan. 13, 2025, President Claudia Sheinbaum presented Plan Mexico, a national initiative developed with the private sector to strengthen economic resilience, promote regional development, and address structural inequalities. The plan aims to attract private investment, expand industrial activity, and integrate Mexico more fully into global value chains, while reducing reliance on Asian imports and increasing domestic production in strategic sectors. 

Experts note, however, that the plan faces structural challenges, particularly in infrastructure, as rapid industrial growth is placing pressure on electricity, water, and transportation systems in northern manufacturing hubs. Although the government has outlined projects to expand electricity generation and transmission, strengthen the national grid, and develop natural gas infrastructure, business groups stress that the plan’s success will depend on timely execution, coordination, and the ability to scale these initiatives to meet rising industrial demand.

Trade Hurdles

Challenges started to come in February 2025, however. Shortly after his inauguration, President Donald Trump imposed 25% tariffs on imports from Mexico and Canada, citing alleged shortcomings in addressing illegal migration and fentanyl trafficking. While products meeting USMCA rules of origin were later exempted, the 25% tariff still applies to goods without certification. Mexico interpreted the move as a gesture of constructive engagement, whereas Canada signaled possible retaliatory measures.

On March 12, the United States applied a 25% tariff on all steel and aluminum imports, rising to 50% on June 4. This contributed to a 60% drop in Mexican steel exports to the United States in April, prompting urgent government action. Minister of Economy Marcelo Ebrard and other officials sought exemptions, while Sheinbaum emphasized protecting jobs, supporting industry, and ensuring fair trade conditions.

In April, Trump introduced the “Liberation Day” tariffs, imposing a baseline 10% levy on imports from most countries, later targeting 60 nations with higher tariffs, though Mexico and Canada, as USMCA members, were exempt. Automotive imports also faced tariffs; a 25% levy on foreign-manufactured vehicles, engines, and components was later reduced to around 15% for vehicles assembled in Mexico with domestic content. Despite relief, rising costs remain a concern, with Ford projecting US$1.5 billion in reduced earnings.

In July 2025, the United States proposed a 30% tariff on additional Mexican imports, temporarily suspended for 90 days while Mexico addresses non-tariff barriers, including regulatory delays, pesticide bans, restrictions in energy and lithium sectors, and telecom monopolies. Unlike prior tariffs, this measure was targeted, designed to incentivize reforms rather than impose blanket duties.

On Nov. 1 a new tariff structure for medium and heavy-duty vehicles and key components took effect. Under USMCA rules, a 25% tariff applies only to non-US content, while buses face a flat 10% rate. Critical parts such as engines, transmissions, tires, and chassis are included, with a 3.75% tax credit for domestically assembled vehicles extended through 2030. Between January and July 2025, US imports of trucks, buses, and specialty vehicles totaled US$32.41 billion, with Mexico as the top exporter at US$25.86 billion, down 13.8% year-on-year.

US-Mexico Disputes on Geography, Security

In January, Trump signed Executive Order 14172, directing that the Gulf of Mexico be renamed the “Gulf of America” in US federal documents and maps. The Mexican government, led by President Claudia Sheinbaum, objected, arguing that the US cannot unilaterally rename a shared body of water and that only the portion under US jurisdiction should differ. After earlier warnings, Mexico filed a lawsuit against Google in May over the Gulf of America label, claiming the change exceeds US authority and infringes on Mexican territorial naming rights.

Separately, in February, the US Department of State designated several major Mexican criminal organizations as Foreign Terrorist Organizations (FTOs) under Executive Order 14157. The groups include the Sinaloa Cartel, Cártel de Jalisco Nueva Generación (CJNG), Cártel del Noreste, Gulf Cartel, La Nueva Familia Michoacana, and Carteles Unidos, along with two transnational gangs. The designations took effect with publication in the Federal Register in February 2025.

Trump’s policy frames the cartel terrorism designation as a national security priority, aiming to dismantle operational and command structures both inside the United States and abroad. Experts warn that this precedent could justify expanded US action against cartel networks, potentially bypassing Mexican government cooperation and increasing bilateral tension.

Mexico and the 1944 Water Treaty

Tensions over the 1944 Water Treaty resurfaced in December 2024 after President Trump accused Mexico of failing to meet its water delivery obligations and threatened a 5% tariff on Mexican imports if additional water was not released immediately. Both governments acknowledge that extraordinary hydrological conditions, storage constraints, and infrastructure limits in the Rio Grande basin, factors addressed by the treaty, affect deliveries.

Amid this stress, Mexico and the United States reached a bilateral understanding to improve water management under the treaty. The Mexican government emphasized that it has not violated the treaty and that all actions remain consistent with its provisions, water availability, and infrastructure limits.

Judicial Elections

Domestically, Mexico held its first judicial elections on June 1, 2025, a reform aimed at reducing impunity and introducing popular voting for judges and magistrates. Voter turnout was low, estimated between 12.57% and 13.32% of registered voters, based on a sample of 1,664 polling stations analyzed by INE statisticians. Staged counting covered Supreme Court ministers, tribunal magistrates, regional chambers, circuit courts, and district judges, with official results expected by June 15.

Passed by MORENA, the reform reduces the number of Supreme Court ministers, shortens their terms, and removes certain age and experience requirements. Supporters say it limits political influence over judges, while critics warn it may expose the judiciary to political, private, and criminal pressures, raising concern among financial markets and international observers, including the United States.

USMCA: A Recurrent Topic in 2025 and 2026

Throughout 2025, Mexico, the United States, and Canada revisited the future of the USMCA. In December, US Trade Representative Jamieson Greer suggested President Trump might withdraw from or renegotiate the agreement, including separate talks with Canada and Mexico. However, President Sheinbaum clarified that no withdrawal is planned and that only the scheduled review is underway.

The 2026 review under Art. 34.7 will determine whether the USMCA is extended to 2042, maintained with annual reviews, or allowed to expire in 2036. Despite uncertainty, analysts note Mexico retains strategic trade advantages with the United States, including proximity, industrial ecosystem, and participation in the regional bloc. Canada and Mexico together account for 73% of US trade-related GDP, reinforcing the incentive to remain aligned with US regulations and keep North America a competitive production hub.