Mexico’s Growth Forecast Slashed Amid USMCA Uncertainty

A Reuters poll of 32 economists released July 13-17 projects Mexico’s GDP to expand 1.1 % in 2026 and 1.8 % in 2027, down from the April consensus of 1.5 % and 1.9 %. The downgrade follows a 0.5 % contraction in 2025 and reflects heightened worries that the United States’ decision to limit the United States-Mexico-Canada Agreement (USMCA) to a ten-year term with annual reviews will dampen private investment.

Reuters

Washington’s refusal to grant a 16-year extension to the USMCA has revived concerns over potential changes to rules of origin, especially in the auto sector where Mexican officials have already rejected U.S. proposals. Government measures aimed at bolstering domestic industries are expected to provide only marginal support, given limited fiscal space and calls for broader reforms such as opening the energy sector.

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• Inflation: Median forecasts hold at 4.0 % for 2026 and 3.8 % for 2027, near the upper bound of the Bank of Mexico’s 3 % ± 1 % target.

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• Monetary Policy: The central bank is projected to keep its benchmark rate at 6.50 % through the end of 2027 to curb price pressures.

Reuters

• Trade Flows: Despite the USMCA review, analysts expect medium-term export volumes to remain strong, though long-term investment decisions face added complexity.

Reuters

U.S. officials announced the shift to a ten-year USMCA term with annual reviews, prompting Mexican policymakers to warn that frequent renegotiations could destabilize export-oriented sectors. S&P Global Ratings’ chief economist for emerging markets, Elijah Oliveros-Rosen, noted that “annual renewals … will complicate long-term investment decisions in export sectors.” Barclays analysts highlighted the auto industry as particularly vulnerable, emphasizing that “uncertainty over the future operating framework” is harder to manage than existing tariff regimes.

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• “not particularly inspiring” — Alberto Ramos, head of Latam economics, Goldman Sachs

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• “Nobody seems to be panicking at this stage. We have to wait and see how trade negotiations evolve. Hopefully they will not be contaminated by outside factors like immigration and other issues,” — Alberto Ramos

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• “However, the annual ?renewals, which could lead to potential changes to USMCA, will complicate long-term investment decisions in export sectors,” — Elijah Oliveros-Rosen, chief economist, S&P Global Ratings

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• “Firms can often navigate tariffs, rules of origin requirements and regulatory changes but what is harder to manage is uncertainty over the future operating framework,” — Barclays analysts

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