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Moody’s: Trump Tariffs Threaten Mexican Auto Sector, Bank Profits
Fitch says Mexico recession likely with Trump 25% tariff.
BY LATINVEX STAFF
Moody’s warns that the planned US tariffs of 25% on all imports from Mexico and corresponding retaliatory measures will have very significant consequences for the Mexican automotive and banking sectors.
“A fall in industrial activity would undermine the growth of electricity demand and slow down macroeconomic dynamism, which would weaken the quality of assets and profitability of banks,” it says.
Meanwhile, Fitch Ratings warns that the Trump administration’s announcement of a 25% tariff on all Mexican imports will likely cause a recession in Mexico in 2025. Earlier, Moody’s, S&P and HR Ratings had also predicted that Mexico’s economy will enter into a recession with the new tariffs, El Economista reports.
President Donald Trump announced on February 1 that the United States would implement a 25% tariff on all imports from Mexico. After Mexican President Claudia Sheinbaum ordered retaliatory tariffs in response and Trump and Sheinbaum talked over the phone, Trump announced that the US tariffs would be suspended by one month. Sheinbaum pledged to sending 10,000 National Guard officers to the border to help stem the flow of fentanyl and migration into the US, a key demand from Trump for it to avoid tariffs.
“Uncertainty is high regarding the scope, scale and timing of tariffs that President Donald Trump is willing to use,” Fitch says. “The last-minute pause on tariff implementation could mean the threat is also being used as a negotiating tool for non-trade concerns such as security, migration, and drugs. Yet Trump has consistently cited bilateral trade deficits as a top concern and invoked tariffs as his preferred tool for remedying them, as well as a means of raising fiscal revenue. Thus, we view some form of tariffs as a material risk for Mexico.”
Mexico is highly vulnerable to U.S. trade protectionism as the largest goods exporter to the U.S. and Mexican and U.S. industries are integrated via long-established supply chains that benefit from the absence of duties on most goods under the United States-Mexico-Canada Agreement (USMCA) trade agreement, Fitch points out.
US trade with Mexico grew by 4% last year to $829.9 billion, according to a Latinvex analysis of new data from the US Census Bureau. The United States exported goods for $324 billion last year, an increase of 0.4%. Meanwhile, imports grew by 6.4% to $505.9 billion.
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