Mexico Avoids Recession Under Sheinbaum, But Slows Amid US and Pemex Pressures

During the first year of Claudia Sheinbaum's presidency, Mexico's economy has slowed notably, although it has dodged the recession forecasts from the start of the year, all under the impact of the tariff war launched by the U.S. and pressures to reduce the fiscal deficit.

The review of the Treaty between Mexico, the United States, and Canada (T-MEC) looms as the largest source of external uncertainty, while the high indebtedness of Petróleos Mexicanos (Pemex) complicates fiscal consolidation in 2025 and 2026, in an environment of growth lower than that forecast by the government itself.

Mexico registered a Gross Domestic Product (GDP) growth rate of 1.5% in 2024. The commercial hardening by the United States since January 20, 2025, with the return of President Donald Trump to the White House, has increased pressure on Mexico, the main origin of U.S. imports, with the imposition of tariffs on key industries such as automotive, steel, and aluminum, in addition to further restrictions on products like tomatoes.

This clash affected "nearshoring," as corporate relocation is known, by stalling investment decisions from the private sector that expected stable rules under the T-MEC, and led several institutions and private analysts to predict a recession in Mexico in 2025.

However, negotiations between Sheinbaum and Trump have positioned Mexico as one of the least affected countries by the U.S. tariffs, allowing bodies like the International Monetary Fund (IMF) to recently adjust growth prospects up to 1%, compared to the virtually nil growth forecast at the start of the year. In line with this, the Mexican government cut its GDP expansion estimate to 1% for 2025, a notable revision from the 2.5% forecast at the beginning of the year.

In an interview with EFE, economist Gabriela Siller, Director of Economic and Financial Analysis at Banco Base, considered that the performance was “better than what was estimated,” despite the “economic stagnation,” though she warned that external and internal risks will continue to condition growth.

Siller emphasized that the resilience of GDP cannot be “credited” as a direct merit of public policy and attributed it to the thrust of exports and aggregate demand.

Although Sheinbaum has not begun the T-MEC review—scheduled for 2026—her government opened a 60-day consultation period to gather opinions and recommendations from the private sector and specialists. In this context, Siller estimated that the review will follow the calendar and generate regulatory uncertainty, while Mexico will seek to defend “a scenario without tariffs” and certainty in rules of origin.

Pemex and the Fiscal Squeeze

Following the administration of Andrés Manuel López Obrador (2018-2024), marked by mega-projects, Sheinbaum faces the challenge of fiscal consolidation, with debt close to 6% of GDP at the end of 2024. The president herself has acknowledged that Pemex, the most indebted oil company in the world with a liability nearing $100 billion, has pressured public finances and hindered the adjustment goal. Consequently, the Mexican Treasury's deficit projections increased from 3.9% of GDP to 4.3% in 2025.

Siller warned that, beyond budgetary support, the rescue of Pemex “has not been accompanied by a change in its business model,” which limits its sustainability.

The economist added that some reforms promoted by López Obrador and backed by Sheinbaum, such as the Judicial Branch reform, have also affected internal prospects. In budgetary matters, Siller urged strengthening items that increase potential growth and productivity.

“In terms of the budget, things can always be done better, but we must remember that the Government's role is to represent the citizens,” she pointed out.

Therefore, she called for directing more resources to health, education, security, and infrastructure, areas where, she said, the economic package project “falls very short.”