First impacts of Trump’s reelection on the Mexican economy – London Business News | Londonlovesbusiness.com

The reelection of Donald Trump has sparked serious concerns about the future of the Mexican economy.

After the results were announced, the Mexican peso depreciated significantly, falling to its lowest level in two years, underscoring Mexico’s economic vulnerability in the face of trade uncertainty with the United States.

This decline highlights the peso’s fragility amid Trump’s protectionist policies and the risk of potential renegotiations of the United States-Mexico-Canada Agreement (USMCA).
Speculations about the imposition of new tariffs or an early review of the USMCA concern analysts, who fear that the manufacturing and automotive sectors—pillars of the Mexican economy—could be affected by rising export costs.

The strength of the dollar has also pressured oil prices, directly impacting Mexico’s oil revenues, a crucial source for the country’s fiscal balance. If these conditions persist, we may see a rapid deterioration in the fiscal and trade balances, which could increase pressure on the peso and limit economic growth prospects.

In this context, foreign investment is also facing significant risks. The recent decline in gross fixed investment and delays in public project execution exacerbate the outlook, as many investors may opt to redirect their resources to markets with greater political and economic stability. Additionally, the Trump administration could adopt measures affecting remittances and heighten migration tensions, which would have a direct impact on millions of Mexican families reliant on these flows.

Despite these challenges, President Claudia Sheinbaum has expressed confidence in maintaining a constructive relationship with the United States, stating that “there is no reason to worry.” However, markets remain cautious, with analysts warning that the current environment could trigger a period of high volatility for the Mexican peso and the broader economy. If uncertainty continues, 2025 could become a challenging year for Mexico, as the economy struggles to grow in an increasingly challenging context, both internally and externally.