US Elections on Mexico: Navigating Future Scenario

Economic Vulnerabilities in a Shifting Political Landscape

Forecasts indicate that the election results could dramatically alter Mexico's economic trajectory, particularly in trade, immigration policies, and monetary conditions. Mexico, being the US's largest trading partner and heavily reliant on exports, is acutely vulnerable to shifts in US policy driven by the presidency.

Trump Scenario: Protectionism and Uncertainty?

Should Donald Trump reclaim the presidency, Mexico could brace for a substantial economic downturn characterized by slower growth, heightened inflation, and increased borrowing costs. Trump's history of protectionist trade policies, particularly erecting tariffs, poses significant risks for Mexico's export-driven economy.

• Trade Policies: Trump has signalled intentions to impose a flat tariff of 5-10% on imports—a move that would disproportionately impact Mexican goods due to the high volume of exports to the US. Such tariffs could disrupt the United States-Mexico-Canada Agreement (USMCA), especially with the impending 2026 renegotiation process. Under Trump’s presidency, this could devolve into a contentious climate of trade negotiations.

• Immigration Policies: Trump's aggressive stance on immigration could lead to tighter border controls and a potential decrease in remittances, which are vital to the Mexican economy. The estimates suggest that curtailing immigration policies could significantly reduce the inflow of remittances that support household consumption and investment in Mexico.

• Monetary Effects: Trump's administration could exacerbate inflationary pressures, resulting in delayed monetary easing in Mexico. The resulting higher interest rates would limit the scope for growth-promoting investments, further stymying the economic recovery in Mexican markets.

• Foreign Relations and Security: Increased tensions with China under a Trump administration would complicate Mexico's geopolitical positioning, forcing it to navigate a more hostile relationship with both superpowers while also contending with the potential for unilateral sanctions or economic fallout from US-Chinese trade conflicts.

Harris Scenario: A Collaborative Approach?

In contrast, a victory for Kamala Harris could usher in a more benign set of policies, continuing along the lines of the Biden administration's relatively open and cooperative approach to US-Mexico relations.

• Trade Continuity and Investment: Harris is expected to uphold the principles of the USMCA, fostering predictability that is advantageous for Mexican exporters. As Harris maintains a focus on cooperation on trade, Mexican industries could benefit from sustained investment flows and stability in trade relations.

• Softened Immigration Policies: Harris’s expected immigration policies would likely be more accommodating than Trump's. While some tightening is foreseeable, the overall environment would permit greater legal migration channels, supporting both labour supply in US markets and remittance flows back to Mexico.

• Economic Growth Prospects: The Harris administration is anticipated to prioritize fiscal measures that stimulate economic growth, including support for nearshoring investment opportunities which Mexico stands to benefit from as US companies seek to diversify their supply chains away from China.

• Environmental Cooperation and Green Economy: A focus on sustainable practices may foster collaboration on energy and environmental policies, aligning both nations towards green technology initiatives. This could simultaneously benefit Mexico's renewable energy sector and improve its global standing in climate affairs.

Key Takeaways

Regardless of the electoral outcome, the stakes for Mexico remain exceptionally high. A Trump-led administration would push Mexico down a path riddled with economic uncertainties, while a Harris presidency could offer stability and growth opportunities.

Looking forward, Mexico must prepare for fluctuations in its relations with the US, actively engaging in strategies that mitigate risks associated with trade and immigration, while seeking avenues for deeper economic integration and cooperation. As the US-Mexico relationship continues to evolve in a complex global landscape, the implications of the 2024 elections will undoubtedly shape Mexico’s economic resilience for years to come.

Disclaimer

This content is meant for information only.

Why SOAR Risk Intelligence...

Apply Risk Intelligence and gain resilience, create new capabilities, and capitalise on opportunities faster and effectively in your risk management oversight. Our team of experts can assist you in strengthening, developing, and transforming the way you manage risks by applying international best practices, advanced analytics, and artificial intelligence in an ever-evolving business landscape.