When US President-elect Donald Trump issued his threat to levy 25% tariffs on Mexico on Day 1 two months ago, we reiterated our longstanding expectations that such a threat would not materialize. As his January 20 inauguration approaches,
we:
- Offer an update on Mexico’s progress in meeting Trump’s demands.
- Outline our main scenarios for next steps.
Mexico progress report:
We have consistently emphasized our belief that Mexico would take pragmatic steps to meet Trump’s demands, thereby decreasing its odds of suffering tariffs under the incoming administration. An overview of the Mexican President Claudia Sheinbaum administration’s key actions in that regard are summarized in the following table:
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On immigration and border security
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- Expanding former President Andres Lopez Obrador’s enforcement measures, which according to Mexican government officials reduced migrant flows by 76% from Q4 2023 to Q4 2024.
- Increased deportations and dismantling of migrant caravans.
- ‘Agree’ to ‘take back’ any number of Mexican nationals, and define a strategy with the governors of the states bordering the US.
- While Sheinbaum has made it clear that Mexico will not accept non-Mexican nationals (except from some countries where it already does), her tone has been to negotiate with Trump to find a middle ground.
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On drugs
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- Sheinbaum’s administration has made symbolic efforts to signal cooperation with the US and provide Trump with political wins, including:
- Launching the largest fentanyl and cocaine crackdown in Mexico’s history.
- Approving a constitutional reform to ban fentanyl.
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On China
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- Mexico imposed tariffs on multiple Chinese goods back in April 2024 (ranging from 5%-50%, including on steel and aluminum).
- We expect an increase in duties and an extension of tariffs in the revision in April 2026.
- Sheinbaum signed a presidential decree on December 19, 2024, that:
- “Temporarily increase the tariff to 35% on textile manufactured goods (138 classifications, textiles, and apparel) and 15% on textile imports (17 classifications), except for markets with which free trade agreements exist…” mostly affecting China.
- Expanded "the list of products that cannot be imported through the IMMEX program”.
- Mexico has tightened monitoring of product origins, potentially including melt and pour data on steel and aluminum exports.
- Limit access of China to infrastructure projects (e.g. trains) & key sectors (e.g. lithium).
- Released “Plan Mexico” which entails a list of policies to protect the domestic economy from Chinese dumping.
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US tariff scenarios:
- We see three main scenarios for Trump’s tariff threats against Mexico, as he comes into office:
- 1) He follows through on his threats.
- 2) He drops his threats.
- 3) He extends his threats.
- Given Mexico’s steps outlined above, we remain confident scenario #1 will not materialize on January 20 or in the foreseeable future thereafter. Considering his incentive to maintain pressure on Mexico, however, continued ‘harassment’ of the country (scenario #3) is arguably more likely than offering it a clean slate (scenario #2) on Day 1.
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Rafael Ch
Partner, Senior Analyst for LatAm & Emerging Markets | Signum Global
+1.917.302.6600
Signum Global Advisors is a policy and strategy firm with offices in New York, San Francisco, Washington, London and Dubai. |
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