Mexico | For now, Mexico is successful at avoiding tariffs

Summary

On Monday, February 3, the heads of state of Mexico and the US reached an agreement to put on hold for a month the imposition of tariffs that the White House pretended to apply to imports coming from Mexico.

Key points

• Key points:
• Evidently, Donald Trump is using tariffs as a negotiation tool to implement his foreign policy, with no regard to the limits and economic costs of these taxes levied on imports.
• This first agreement holds out hope that the imposition of tariffs be on hold forever since the potential economic damage could be of high impact.
• What economic effects could these tariffs have on the US? The answer depends on various factors, among which the following stand out: the duration of the tariffs, possible tariff retaliations by Mexico and Canada, exchange rate adjustments and the spare capacity in the US to produce the goods that replace imports with the 25% tariff.
• What economic consequences the tariffs would have for Mexico? The impact on investment, exports and competitivity could be very adverse. Therefore, there would be a significant downside risk to economic growth in 2025. Our estimations point to a negative effect of up to 2.5% of GDP if tariffs have a lasting duration.

Geographies

Topics

Tags