(Bloomberg) — Mexico’s economic system expanded barely within the first quarter on a bounce in agricultural output, permitting President Claudia Sheinbaum to keep away from recession as she steers the nation by means of an unpredictable US tariff coverage.
Gross home product grew 0.2% within the three months by means of March, above the 0.1% median estimate of economists surveyed by Bloomberg, after a 0.6% decline within the prior quarter. From a yr earlier than, GDP expanded 0.8%, greater than the 0.7% median estimate, based on preliminary knowledge revealed Wednesday by the nationwide statistics institute.
Quarterly development was pushed by an 8.1% surge within the agricultural sector, which bounced again from a plunge on the finish of 2024. However, trade shrank 0.3% in the course of the interval and the providers sector was flat.
The bounce in agriculture “offset weak spot in each the providers and the commercial sector,” Kimberley Sperrfechter, an rising markets economist at Capital Economics, wrote in a analysis notice.
Since Donald Trump’s return to workplace, analysts have anticipated Mexico’s economic system would gradual for a fourth yr in 2025 on a proliferation of headwinds together with the “America First” commerce protectionism from its northern neighbor. Surprisingly, those self same considerations helped first-quarter outcomes. Though manufacturing output was weak, exports have been robust, with US importers bringing ahead orders to dodge extra punitive tariffs on Mexico’s items.
What Bloomberg Economics Says
“GDP knowledge present the Mexican economic system rose within the first quarter and narrowly prevented a technical recession, however it doesn’t ease considerations in regards to the development outlook. Outcomes together with month-to-month knowledge by means of February level to exercise and home demand falling in March consistent with waning tailwinds from companies front-running tariffs that contributed to first-quarter development.”
— Felipe Hernandez, Latin America economist
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The chance of onerous duties on exports to the US, far and away Mexico’s high buying and selling companion, continues to loom with Trump’s threats of “reciprocal” tariffs on extra items nonetheless a really actual risk.
Levies on merchandise that aren’t coated by North America’s free commerce settlement are already in place, together with duties on metal, aluminum and the parts of completed cars that aren’t made within the US.
Sheinbaum has been making an attempt to scale back the tariffs through direct telephone calls with Trump whereas Mexican officers additionally journey to Washington on a weekly foundation.
Development Forecasts
Since Trump’s victory, companies in Mexico have been getting ready for a situation of excessive levies by growing their exports to the US and searching for components suppliers from nations aside from China.
In the meantime, actual property builders have been providing incentives to overseas firms to remain in Mexico, betting the native nearshoring growth is not going to finish.
Nonetheless, Latin America’s No. 2 economic system shrank by essentially the most since 2021 within the final quarter of 2024, and plenty of analysts have been marking down their 2025 development forecasts.
Mexico’s central financial institution just lately lower its 2025 GDP estimate in half to 0.6% whereas a Citi survey of analysts pegged it decrease nonetheless at 0.2% — down from 1% in February.
The weak first quarter GDP knowledge will reinforce the central financial institution’s considerations in regards to the well being of the economic system, “which presently seems to be enjoying a extra outstanding function than inflation” for policymakers, Sperrfechter wrote. “This could pave the way in which for one more 50bp fee lower at Banxico’s assembly subsequent month.”
Nationwide Temper
Sheinbaum’s administration, in flip, has supplied incentives to overseas firms to relocate operations to Mexico, particularly by means of beneficiant tax breaks and the promise of considerably diminished crimson tape.
Each Thursday at her day by day press conferences, she pronounces thousands and thousands of {dollars} in promised investments from native and overseas firms as an indication of investor confidence.
On the similar time, Sheinbaum’s reputation has surpassed that of her predecessor and mentor, Andres Manuel Lopez Obrador, as she rallies the nation behind her.
Whereas about 80% of Mexicans consider tariffs have damage the economic system, roughly three-quarters say they’re assured Sheinbaum will be capable of negotiate new agreements to scale back them.
Most Mexicans additionally see the nation on the right track general, with 54% saying they count on the economic system to enhance over the subsequent six months towards 21% who see it worsening, based on LatAm Pulse, a survey performed by AtlasIntel for Bloomberg Information and revealed on Monday.
Regardless of that optimism, the primary quarter GDP report was in step with the broader image of slowing financial development underneath the burden of tighter monetary circumstances and worsening exterior headwinds, Andres Abadia, chief Latin America economist at Pantheon Macroeconomics, wrote in a notice.
“Output in key sectors is underneath extreme pressure, underscoring the complexity of the macro backdrop,” Abadia wrote. “Exercise will seemingly stay subdued within the close to time period. Industrial manufacturing is about to remain underneath strain, although output may see a brief carry as companies construct inventories forward of potential new US tariffs.”
–With help from Rafael Gayol and Robert Jameson.
(Updates with particulars of the report and analyst feedback beginning within the third paragraph)
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