The International Monetary Fund (IMF) is now predicting that the Mexican economy will contract in 2025, slashing its previous forecast of 1.4% growth as United States President Donald Trump pursues his “America First” protectionist agenda.
The Washington D.C.-based financial agency said Tuesday that it expects the Mexican economy to contract 0.3% this year, a downward revision of 1.7 percentage points compared to its January forecast.
The IMF also trimmed its growth outlook for the Mexican economy in 2026, predicting a 1.4% expansion, 0.6 percentage points lower than its previous forecast.
The latest forecasts are included in the IMF’s World Economic Outlook report, published on Tuesday. The financial agency’s reduction of its expectation for the Mexican economy this year is larger than any other growth downgrade it made. Furthermore, the IMF is not predicting an economic contraction this year for any other country that appears on its World Economic Outlook table.
The IMF also revised downward its 2025 and 2026 growth forecasts for Latin America and the Caribbean, in large part due to its more pessimistic expectations for the Mexican economy.
It is now predicting that the regional economy will grow 2% this year — 0.5 percentage points lower than its January forecast — and 2.4% in 2026. The 2026 forecast is 0.3 percentage points lower than that made in January.
“The revisions owe largely to a significant downgrade to growth in Mexico, by 1.7 percentage points for 2025 and 0.6 percentage point for 2026, reflecting weaker-than-expected activity in late 2024 and early 2025 as well as the impact of tariffs imposed by the United States, the associated uncertainty and geopolitical tensions, and a tightening of financing conditions,” the IMF said in its World Economic Outlook report.
The United Nations financial agency said that “tariffs permanently reduce global trade and reallocate flows across countries.”
“Canada, Mexico, China, and especially the United States see the largest declines in exports, in the latter country due in large part to the long-term real appreciation of the US dollar,” the IMF said.
“Although China sees the largest tariff increase, the decline in China’s exports is mitigated by export diversion to other markets,” the agency added.
#WEO @IMFNews is out, significant downgrades and lower growth forecast as expected-> Global growth (down to 2.8%), most EMDEs, suffer from tariffs, trade wars, uncertainty, debt. pic.twitter.com/qvWZ36RlGU
— Nicole Goldin, PhD (@nicolegoldin) April 22, 2025
“Tariffs generate global long-term output losses. … Canada and Mexico, China, and the United States are the most affected,” the IMF said.
The United States has imposed tariffs on imports from virtually all its trading partners, but has singled China out for special treatment, imposing duties of 145% on most Chinese goods as Trump escalates the trade war he initiated in his first term as president.
Mexican steel and aluminum and hundreds of products made with those metals face 25% tariffs when entering the United States, as do other Mexican goods that don’t comply with the rules of the USMCA free trade pact. U.S. tariffs are also in effect for vehicles made in Mexico, although U.S. content in those vehicles is not taxed.
The Mexican government is currently attempting to negotiate better trading conditions with the United States, where Mexico sends more than 80% of its exports. President Claudia Sheinbaum spoke to Trump about trade last week, but she said Monday that no agreement was reached to lift the tariffs on Mexican goods.
The IMF also cut its 2025 growth outlooks for the United States economy and the world as a whole.
It is forecasting that the U.S. economy will expand 1.8% this year and that global output will increase by 2.8%. The outlook for the U.S. economy was lowered by 0.9 percentage points while the world output growth forecast was cut by 0.5 points.
“We are entering a new era as the global economic system that has operated for the last 80 years is being reset,” IMF chief economist Pierre-Olivier Gourinchas told reporters on Tuesday.
The agency’s World Economic Outlook report is subtitled “A critical juncture amid policy shifts,” a reference mainly to the protectionist agenda of Trump, who has raised U.S. tariffs to their highest level in 100 years, according to the IMF.
Sheinbaum: ‘We don’t agree’ with the IMF
At her Tuesday morning press conference, President Sheinbaum said that her government doesn’t agree with the IMF forecast that the Mexican economy will contract in 2025.
“It’s not that the president doesn’t agree, but rather we have [our own] economic models,” she said.
Sheinbaum highlighted that the Finance Ministry’s current forecast for the Mexican economy — that it will grow by 1.5-2.3% this year — doesn’t coincide with the IMF’s outlook.
The president asserted that the IMF believes that the Mexican government “can’t do anything to change a situation that comes from the market itself.”
“We don’t agree with that vision. That’s why we created Plan México,” she said, referring to the federal economic initiative that seeks to reduce reliance on imports by boosting domestic output, create 1.5 million new jobs and make Mexico the 10th largest economy in the world by 2030, among other objectives.
“… We have a plan to strengthen the Mexican economy,” Sheinbaum said after noting that she presented a range of actions and programs to strengthen Plan México earlier this month.
A range of public infrastructure projects — including highway projects, water projects, rail projects, housing projects, port projects and airport projects — are also part of Plan México. Public spending on those projects and other initiatives will help spur growth in Mexico, according to the federal government.
“If there wasn’t public investment, there would probably be the reduction in economic growth” that the IMF is forecasting, Sheinbaum said Tuesday.
What’s the current state of the Mexican economy?
The publication of the IMF’s latest World Economic Outlook report coincided with the release of preliminary data on the performance of the Mexican economy this year.
The preliminary data published by the national statistics agency INEGI on Tuesday shows that Mexico’s GDP fell 0.2% in March compared to the same month last year. Compared to February, the Mexican economy was stagnant in March, recording 0% growth, INEGI said.
The secondary or manufacturing sector declined 0.3% in annual terms in March and recorded 0% growth compared to February.
The tertiary or services sector grew 0.3% in annual terms in March but contracted 0.1% on a month-over-month basis.
INEGI didn’t release preliminary data for the primary or agricultural sector.
Gabriela Siller, director of economic analysis at Mexican bank Banco Base, said on X that the data indicates that the Mexican economy contracted 0.04% in the first quarter of 2025 compared to the final quarter of last year.
Annual percentage changes to INEGI’s Global Economic Activity Indicator (IGAE), which analyzes monthly growth in Mexico’s primary, secondary and tertiary sectors, between March 2024 and March 2025.
The Mexican economy contracted on a sequential basis in the final quarter of 2024, meaning that GDP will have declined in two consecutive quarters if final data confirms the Q1 contraction indicated by the preliminary data.
Two consecutive quarters of negative GDP growth are widely considered to be indicative of a recession.
If the Mexican economy were to contract in 2025 — as the IMF is forecasting — it would be the first year of negative growth since 2020, when GDP plunged 8.5% due to the COVID pandemic and associated restrictions.
The Mexican economy grew 1.5% annually in 2024, a significant slowdown compared to a 3.2% expansion in 2023.
By Mexico News Daily chief staff writer Peter Davies ([email protected])
