Our economic outlook for Mexico

Recent signs of improvement reflect Mexico’s steady resilience in 2025, but lingering trade uncertainties with the U.S. still cloud the outlook. After a modest 0.2% expansion in the first quarter, real GDP exceeded expectations by growing 0.6% in the second quarter, led by gains in manufacturing and services. Export orders face pressure from softer U.S. demand and higher tariffs, but the rate of decline has slowed. Nevertheless, trade uncertainty and global growth prospects continue to stifle business sentiment and fixed investment. We have refined our full-year growth forecast to a range of 0.5%–0.75%.

Mexico’s longer-term outlook remains constructive. The country continues to benefit from U.S.-China trade realignment, with nearshoring trends reinforcing Mexico’s role as a key supply-chain hub. With United States-Mexico-Canada Agreement exemptions, nearly 80% of Mexico’s exports to the U.S. are duty-free, translating to an overall effective tariff rate near 7%—one of the lowest among U.S. trading partners. Export similarity with China and deep structural integration with the U.S. economy position Mexico well to capture a larger share of North American manufacturing over time.

On the monetary front, the Bank of Mexico (Banxico) cut its policy rate by 25 basis points to 7.75% in August, emphasizing the need for a less restrictive stance while also signaling that the easing cycle is nearing its end. (A basis point is one-hundredth of a percentage point). With core inflation remaining above target despite easing headline inflation pressures, we expect Banxico to deliver just one more rate cut this year.