United States President Donald Trump’s proposed tariffs on Mexico could limit economic growth to 0.6% in 2025, financial services company Moody’s Ratings warned on Monday. 

“Our estimates indicate that the Mexican economy would lose around 1 percentage point of growth in 2025. We are estimating that Mexico would only grow 0.6% this year,” said Director of Economic Analysis for Latin America at Moody’s Analytics Alfredo Coutiño in an online conference Tuesday. 

On his first day in office Monday, President Trump announced plans to introduce 25% tariffs on products from the U.S.’s two main trading partners, Mexico and Canada, starting February 1. 

On January 17, the International Monetary Fund predicted Mexico would see economic growth of 1.4% in 2025. The revised Moody’s forecast suggests growth may falter in the wake of U.S. tariffs causing trade to slow. 

This could also harm Mexico’s nearshoring efforts, which President Claudia Sheinbaum has been encouraging through her term-long Plan México strategy, which is aimed at luring more foreign investment to Mexico.

Coutiño also warned that tariffs could cause inflation to rise and the peso to depreciate, which may prompt Mexico to tighten its monetary policy. 

“The tariff and protectionist policy of the United States government will have an effect on investment flows due to the relocation of companies, not only from the U.S. but from other parts of the world, particularly Asian companies that wanted to reach the Mexican market,” said Coutiño.

By contrast, Moody’s Ratings predicts that the Latin American region will experience greater GDP growth in 2025, of around 2.1%. 

This view is also shared by the World Bank, which projected 2.6% growth for the Latin America and the Caribbean region in late 2024. In an October report, the organization predicted Mexico would lag behind its neighbors with just 1.5% growth, the third lowest among all regional nations. 

With reports from Forbes