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| Mexico GDP |
Mexico’s GDP Growth Outlook Faces Downside Risks from US Tariff Hikes
Mexico’s 2025 GDP growth forecast remains modest at 0.1%, according to the Mexican Institute of Finance Executives (IMEF). However, the outlook could deteriorate significantly if the United States raises tariffs on Mexican goods from 25% to 30%. IMEF’s July survey of 43 analysts also maintained inflation expectations at 4% and predicted the central bank’s benchmark interest rate to fall slightly to 7.5% by year-end 2025. Despite stable inflation projections, Mexico’s formal employment sector shows alarming trends. The social security administration IMSS reported a net loss of 139,444 formal jobs in Q2 2025, leading IMEF to cut its job creation forecast from 190,000 to 160,000—a notable downgrade reflecting labor market weakness.
Tariff Increases and Auto Sector Vulnerability
The potential tariff hike poses a direct threat to Mexico’s automotive industry, a major driver of both GDP and scrap metal demand. Victor Herrera, head of economic studies at IMEF, warns that while layoffs have not yet occurred, many auto plants have halted production or sent workers home with half pay following the April imposition of a 25% tariff. If the new 30% tariff takes effect as planned in August, layoffs could accelerate within 60 to 90 days, severely impacting economic growth and scrap metal consumption. The average effective tariff could rise from 4% to 15%, with 8–10% of auto exports facing the full 30% duty, potentially disrupting supply chains and increasing production costs. This could dampen demand for steel scrap used in automotive manufacturing, affecting scrap metal traders and recyclers both regionally and globally.
Currency and Market Implications Amid Policy Uncertainties
IMEF expects the Mexican peso to strengthen slightly to Ps20.1 per US dollar by the end of 2025, an improvement from June’s forecast. However, this outlook is tempered by external pressures, including rising Japanese interest rates and anticipated fluctuations in US dollar strength. These factors could lead to renewed peso volatility, complicating trade and investment decisions within Mexico’s metal and recycling sectors. Looking further ahead, IMEF downgraded the 2026 GDP growth forecast from 1.5% to 1.3%, with the peso expected to close 2026 at Ps20.75/$1. The interplay of tariffs, currency shifts, and employment dynamics underscores the fragility of Mexico’s economic outlook and highlights risks for scrap metal markets tied to automotive and industrial demand.
ScrapInsight Commentary
The US tariff threat could significantly slow Mexico’s economic growth, especially harming the automotive sector that drives scrap metal demand. If tariffs rise to 30%, scrap traders and recyclers should anticipate reduced volumes and price pressure. Policymakers must monitor trade tensions closely to safeguard the recycling industry and support a resilient circular economy.
