Donald Trump’s tariff threats caused the Moody’s rating agency to cut its growth forecast for Mexico.
First, Donald Trump hit the Mexican peso with the threat of 25 percent tariffs on products made in Mexico that the United States imports. President Claudia Sheinbaum responded firmly: “One tariff will come in response to another” and now the Moody’s rating agency issued a warning to the Mexican authorities.
According to the rating agency’s forecasts, Mexico’s economy will grow less because of the so-called “Trump effect.” For that reason, Moody’s cut Mexico’s GDP growth forecast to 1.2 percent from the previous 1.5 percent.
As if that were not enough, Moody’s warned that “there will be collateral effects” such as depreciation of the peso, drop in remittances, and an impact on inflation in Mexico.
The rating agency emphasized that the “Mexican economy will be one of the most exposed to the negative effects of Donald Trump’s economic policies.” “Mexico will be affected both in its economy and in its financial market.
The US policies that will cause the most significant adverse effects in Mexico are tariffs and immigration.
The document published by Moody’s adds that the “adverse effects” will affect Mexico’s economic performance downwards, particularly in the next two years.
Mainly, the Mexican economy will be affected in investment and remittances, while the financial sector will be shaken by risk aversion and volatility.
The decrease in the flow of remittances will contribute to Mexico’s economic slowdown, particularly for low-income households that depend on these remittances to supplement their income.
This is worrying considering that remittances have represented an important buffer in the Mexican economy in the last three years,” Moody’s warns.
In addition to cutting Mexico’s GDP growth forecast, Moody’s states that the economic scenario includes “a depreciation of the peso against the dollar of 10 percent from the current level.”
An impact on inflation in Mexico is also expected. Moody’s estimates that it will rise to a range of 4 to 5 percent by the end of 2025, while “in 2026 the recovery will be slow and will be conditioned by the global economic environment and the performance of international trade.”
Source: El Financiero
