Market News

(Bloomberg) -- Mexico’s economy expanded slightly in the first quarter on a jump in agricultural output, allowing President Claudia Sheinbaum to avoid recession as she steers the nation through an unpredictable US tariff policy.

Gross domestic product grew 0.2% in the three months through March, above the 0.1% median estimate of economists surveyed by Bloomberg, after a 0.6% decline in the prior quarter. From a year before, GDP expanded 0.8%, higher than the 0.7% median estimate, according to preliminary data published Wednesday by the national statistics institute.

Quarterly growth was driven by an 8.1% surge in the agricultural sector, which bounced back from a plunge at the end of 2024. On the other hand, industry shrank 0.3% during the period and the services sector was flat.

The jump in agriculture “offset weakness in both the services and the industrial sector,” Kimberley Sperrfechter, an emerging markets economist at Capital Economics, wrote in a research note.

Since Donald Trump’s return to office, analysts have expected Mexico’s economy would slow for a fourth year in 2025 on a proliferation of headwinds including the “America First” trade protectionism from its northern neighbor. Surprisingly, those same concerns helped first-quarter results. Although manufacturing output was weak, exports were strong, with US importers bringing forward orders to dodge more punitive tariffs on Mexico’s goods.

What Bloomberg Economics Says

“GDP data show the Mexican economy rose in the first quarter and narrowly avoided a technical recession, but it doesn’t ease concerns about the growth outlook. Results along with monthly data through February point to activity and domestic demand falling in March in line with waning tailwinds from businesses front-running tariffs that contributed to first-quarter growth.”

— Felipe Hernandez, Latin America economist

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The risk of onerous duties on exports to the US, far and away Mexico’s top trading partner, continues to loom with Trump’s threats of “reciprocal” tariffs on more goods still a very real possibility.

Levies on products that are not covered by North America’s free trade agreement are already in place, along with duties on steel, aluminum and the portions of finished automobiles that aren’t made in the US.

Sheinbaum has been trying to reduce the tariffs via direct phone calls with Trump while Mexican officials also travel to Washington on a weekly basis.

Answering a question about how the GDP contraction in the US during the first quarter could affect Mexico, Sheinbaum said later on Wednesday she was confident that the local economy is doing well, since a recession was avoided, unemployment remains low and inflation is stable.

“There is growth, 0.8%, of course we want more, but in the face” of tariffs and the “uncertainty of all these months, it is good news,” she said during a press conference.