The Final(?) Tariff Countdown: Markets Take Fright, Mexico Watches
Donald Trump’s April 2nd Liberation Day tariff announcement is shaping up to be yet another economic rollercoaster—one that seems to be driven as much by impulse as by his undeniable American First strategy. As has become usual, Trump is teasing “very nice” tariffs that somehow won’t be so nice for global markets. Indeed, investors are taking fright, with equity indexes posting sharp declines, especially in the US.
Goldman Sachs is already sounding the alarm, raising recession probabilities from 20% to 35%. Their logic? A slowing economy, jittery investors, and a White House that seems increasingly comfortable with economic “pain.” Meanwhile, Mexico’s President, Claudia Sheinbaum, is sticking to her strategy, trying to maintain a certain distance from the chaos, while engaging as necessary with the Trump administration to secure preferential treatment. Mexico, which has been thriving under the nearshoring boom, is now facing an awkward reality—just as it was positioning itself as the go-to manufacturing hub for U.S. companies, its largest trading partner is about to start erecting roadblocks.
Behind closed doors at Palacio Nacional, Sheinbaum’s administration is fine-tuning its response. On Monday, key members of her team gathered, including Foreign Minister Juan Ramón de la Fuente, Economy Undersecretaries Luis Rosendo and Vidal Llerenas, Ximena Escobedo from the Productive Development Unit, and Altagracia Gómez, head of the Nearshoring Agency. Their task? To craft a strategy to shield Mexico’s economy from the latest round of Trumpian unpredictability. With nearshoring’s potential fading and Mexico cementing itself as the US top trading partner, the stakes couldn’t be higher.
Mexico’s Fiscal Tightrope: Cutting Spending While Betting on Growth
The Mexican government is tightening its belt ahead of the 2026 fiscal outlook, so far with a surprising level of efficiency. In a rare twist for public finances, the deficit is shrinking faster than expected. The public deficit stood at 114.2 billion pesos for the first two months of 2025—less than half of the 283.2 billion pesos initially projected. Even more impressive, the primary balance (which excludes debt interest payments) is outperforming expectations, marking a 74.3% reduction in the fiscal deficit compared to last year’s explosive 220% increase.
This fiscal discipline is no accident. President Claudia Sheinbaum and newly appointed Finance Minister Edgar Amador Zamora are fulfilling their commitment to reduce the fiscal deficit from 5.7% to 3.9% of the GDP by the end of 2025. The secret? A brutal cut in public spending—220.3 billion pesos slashed—though revenues also fell 20.8 billion pesos short of expectations.
Hacienda is gearing up to present its Precriterios Generales de Política Económica, the key economic assumptions underpinning next year’s budget, which are sure to be closely scrutinized. The government currently projects a 2.3% GDP growth rate for 2025, which is far more optimistic than Banxico’s 0.6% forecast. With global instability, Trump’s tariff war intensifying, and a potentially volatile exchange rate, an economic reality check may be on the way.
Independent analysts, including JP Morgan, are warning that Mexico’s GDP growth is in fact likely to be near zero this year, and that will affect revenues as the year goes on, jeopardizing fiscal targets. The result? According to JP Morgan, “We expect Moody’s to announce a one-notch downgrade of Mexico’s debt rating within the next six months.”
Judicial Campaigns Start: Will Mexico’s Courts Remain Independent?
Mexico’s upcoming judicial elections are unprecedented, not just in scale but in the sheer number of challenges they present. The goal was to democratize the judiciary; however, many argue the principle of representation has been compromised in the process. Instead of a balanced system reflecting population size, some regions—particularly Mexico City—will have disproportionate influence over judicial appointments that will shape national jurisprudence for decades. (That said, it can be easily argued that this reflects the Capital’s outsized judicial importance to the country).
From the outset, various commentators and analysts have warned that this election is being affected by rushed implementation, insufficient resources, and structural flaws. They worry that complex ballots, low campaign spending limits, and a lack of transparency in financial reporting will make it difficult for voters to cast an informed vote. They point to concerns around unreported contributions, financial and in-kind, present at every electoral process in Mexico, are particularly high now.
With 881 federal judicial positions and many more at the local level in 19 states, this will be a massive undertaking. Yet, the real concern isn’t just its size and process, but its impact. The winners are expected to come mainly from the government’s ranks, reinforcing political loyalty over judicial independence.
President Claudia Sheinbaum announced that she will challenge the INE’s ruling, which bans public officials, including the president, from promoting the electoral process. She argues that institutions should help inform citizens about the June 1 judicial elections, calling them a “transformative event for Mexico”. While she acknowledges that partisan promotion is prohibited, she insists that neutral electoral outreach should be allowed.
This dispute escalates tensions between the federal government and the electoral authority, highlighting the fine line between public information and political neutrality. The case now heads to the Federal Electoral Tribunal (TEPJF), which will determine whether Sheinbaum’s government can legally participate in election-related messaging.
Morena’s Internal Struggles Explode Over Cuauhtémoc Blanco
Cuauhtémoc Blanco once again managed to drag Morena into yet another internal meltdown, deepening rifts not only within the party but also with its political allies. The decision by lawmakers to prevent Blanco from losing his immunity—despite serious accusations—didn’t just expose divisions: it turned the Chamber of Deputies into a verbal boxing match. Morena and PRI teamed up to block the motion, arguing the case against Blanco was flimsy and lacked a solid investigation. Meanwhile, PT, a longtime Morena ally, broke ranks, denouncing the former footballer as a potential abuser.
The vote, however, is just another symptom of Morena’s growing fractures. Since AMLO’s departure, the ruling party has been slowly splintering into competing factions, much like the PRD before it (back when they were openly referred to as “tribes”). Ricardo Monreal, Adán Augusto López, and even AMLO’s son Andy have all played a role in this power struggle. The latest battle over Blanco further underscores the brewing war for control ahead of the 2027 elections, when 16 governorships and Congress will be up for grabs. With Morena, PT, and PVEM now openly at odds, the party that once prided itself on unity is starting to look more and more like just another political machine prone to infighting.
Contact:
Laura Camacho
Executive Director Miranda Public Affairs
laura.camacho@miranda-partners.com
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