Factory Focus: Weekly Vitals | March 21, 2025

Written by Prodensa | Mar 21, 2025 2:37:41 PM

Factory Focus Weekly Insights for Manufacturing in Mexico

It's the blog for manufacturing executives operating in Mexico. Designed as a concise, high-value fact sheet, it delivers critical weekly updates on legislative and regulatory changes that could impact your business.

Compliance Under the USMCA

Emilio Cadena, president of Prodensa, stated that if the U.S. maintains tariff exemptions under the USMCA, companies not yet complying would need 6 to 12 months to adapt. Shifting suppliers is complex and requires investment in infrastructure, as well as ensuring sufficient factories, machinery, and workforce. According to the Cato Institute, 40% of exports to the U.S. would need to transition from Most Favored Nation (MFN) status to avoid a 25% tariff imposed on March 4. This shift affects multiple sectors, including aerospace, medical devices, and capital goods, beyond the automotive industry. The uncertainty surrounding the U.S. decision on April 2 is delaying investment projects, with 30% of Prodensa’s clients putting plans on hold, particularly Chinese investors. While Cadena sees short-term uncertainty, he remains optimistic in the medium term, given Mexico’s growing importance in U.S. supply chains.

Source: REFORMA

Marcelo Ebrard travels to DC for further tariff negotiations

Marcelo Ebrard, Mexico’s Secretary of Economy, traveled to Washington for the fourth time this Thursday to negotiate with the U.S. government the suspension of 25% tariffs on Mexican products, set to take effect on April 2. Mexico has already secured two temporary suspensions, but economic uncertainty persists. Organizations like the OECD predict a 1.3% contraction in Mexico’s GDP in 2025 due to tariff policies and slowing investment. Exports to the U.S., accounting for nearly 30% of Mexico’s GDP, are at risk, impacting key sectors such as automotive and manufacturing.

Fitch has downgraded its growth projection to 0%, and inflation is expected to remain above 3%, complicating economic recovery. Additionally, foreign investment could decline due to trade uncertainty, affecting employment and small businesses. While President Claudia Sheinbaum’s administration seeks to diversify trade partners, the U.S. remains Mexico’s dominant market. A possible alternative scenario, where tariff exemptions under the USMCA agreement are maintained, could prevent a severe recession, with marginal growth of 0.1% in 2025 and 0.8% in 2026. However, the lack of clarity regarding the final stance of the Trump administration complicates Mexico’s economic strategy.

Source: FRANCE 24

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