U.S. tariff could cut Mexico's GDP growth by 1 percentage point: Moody's Analytics

Alsharq Tribune-AFP 

A proposed 30 percent U.S. tariff on Mexican goods could reduce Mexico's economic growth by 1 percentage point over the next year, Moody's Analytics estimated Tuesday.

The credit-rating agency's analytical arm said the estimate was based on the tariff announced by U.S. President Donald Trump on July 12, which takes effect in August.

The tariff would hurt Mexico's trade balance by making its exports more expensive and less attractive to U.S. buyers. That drop in demand would in turn hit domestic production and employment, said Alfredo Coutino, head of Latin America economic research at Moody's Analytics.

Moody's report indicates the immediate impact will be reflected in a 3.4 percent drop in the volume of Mexican exports to the United States in the first three months under the new tariff. Over a full year, total exports could decline by 2.6 percentage points, considering the additional effects on imports, the exchange rate and other factors.

Since real exports account for around 40 percent of real GDP, and a large share of those exports go to the U.S. market, the tariff could reduce GDP by about 1 percentage point over the year, Coutino said.

Mexico's economy, the second largest in Latin America after Brazil, slowed in 2024 to grow 1.4 percent, down from 3.3 percent the previous year, according to official figures.

The new tariff would come on top of other U.S. trade barriers already in place, including duties on steel and aluminum and a recently imposed quota on tomato imports.if