What Trump means for Latin America in 2025

Business concerns over the impact of US tariffs are high in the run-up to Donald Trump’s inauguration. In Latin America we expect only Mexico to directly face new tariffs. However, a swirl of different tariffs threats leaves open many possibilities and room for gradualism in phasing them in. In this report, we share our baseline forecasts and two scenario analysis results.

• Our baseline forecasts: 3% of Mexican exports by value (steel, aluminum, and re-exports of Chinese-made electric vehicles), will face 10% higher US tariffs, phased in over 2026-2027. We think Mexico would respond with 10% tariffs on targeted US exports to add pressure in key republican constituencies, as seen in 2018.
• Scenario 1 targeted tariffs: In this scenario, we assume the US implements 25% tariffs only on key sectors. For Mexico, we think this would include steel, aluminum and re-exports of Chinese-made electric vehicles. However, due to just 3% of Mexico-US trade being targeted, we think the effects would be minor: Mexico’s growth is at most 0.1ppts lower, and the rest of Latin America is barely impacted.
• Scenario 2 blanket tariffs: In this scenario, we assume a 25% US tariff on all Mexican exports starting in Q1 2025. This could push Mexico into a technical recession from Q4 2025. Tariff retaliation and peso weakness would raise inflation to 6%, while Banxico would be under pressure to hike or significantly slow its easing plans. The rest of Latin America would feel the heat from a slowdown in their trading partners. Trump’s threats also include 10% tariffs on imports from China, so economies most exposed to Chinese demand would suffer the most – we estimate Chile and Peru’s GDP would be close to 0.5% below our baseline forecast over 2026-2027.

Download the full report to uncover the full analysis.