Coverage window:
15–31 December 2025
• Policy mix is shifting: monetary easing is underway, while trade policy turns more defensive to support domestic industry.
• Inflation is calm on the headline, sticky underneath: core remains elevated enough to keep the easing cycle cautious.
• Markets ended the year with conviction: MXN and local equities closed 2025 strongly, implying a constructive risk tone into 2026—pending policy execution.
• Tourism continues to function as a services stabilizer: strong seasonal demand plus a sizable investment pipeline.
1) Trade policy: Temporary tariff hikes formalize a “defensive” stance into 2026
In late December, Mexico published a decree establishing temporary tariffs (5% to 50%) across hundreds of tariff lines spanning sectors such as steel/aluminium, textiles/apparel, footwear, chemicals, plastics, paper, glass, electrical goods and more.
The decree’s stated objective is to reduce distortions and support vulnerable domestic industries, while preserving preferential treatment for imports that qualify under Mexico’s trade agreements.
This is a direct input-cost and sourcing event. The near-term corporate impact is margin pressure and compliance complexity; the medium-term opportunity is import substitution and supplier localization—if capacity exists.
2) Monetary policy: Banxico cuts the policy rate to 7.00%
On 18 December, Banxico lowered the target for the overnight interbank rate by 25 bps to 7.00% (effective 19 December).
In its statement, the Board explicitly referenced exchange-rate behavior, weak economic activity, and the potential impact of changes in global trade policy, signaling a data-dependent easing path rather than an aggressive cycle.
The marginal reduction helps debt service and refinancing economics, but the bigger effect is expectations: the central bank is prioritizing growth risks while guarding credibility on inflation.
3) Inflation: Headline benign; core still sticky (1st half of December)
INEGI reported 0.17% biweekly headline inflation in the first half of December, with core inflation at 4.34% y/y (non-core: 1.71% y/y).
The composition underscores the point: headline has improved, but core momentum is still resistant—relevant for wages, services, and contract pricing.
The new tariff regime raises the probability of “cost-push” episodes in early 2026, especially where supply chains depend on non-FTA imports.
4) Activity: October Global Indicator of Economic Activity (IGAE) surprises to the upside
INEGI’s IGAE showed +1.0% m/m and +1.6% y/y growth in October (seasonally adjusted).
By component:
- Primary activities: +1.4% m/m
- Secondary activities: +0.7% m/m
- Tertiary activities: +1.2% m/m
This supports a “soft patch, not a break” narrative into year-end—particularly in services.
5) Public finances: November results beat the program
SHCP’s November public finance update reported results better than programmed, including:
- A budget deficit MXN 91bn lower than expected
- A primary balance MXN 37bn above plan
This reinforces a year-end message of fiscal control.
In Mexico, fiscal discipline is a first-order determinant of risk premia (rates, FX) and therefore corporate funding conditions.
6) The peso closes 2025 at 18.0080 per USD (≈ +13.77% y/y)
Mexico’s peso ended the year at 18.0080 per USD, implying an appreciation of roughly 13.77% versus the 2024 close, according to Banxico records cited in financial press.
A strong currency helps inflation and imported input costs, but it can compress margins for exporters without productivity offsets.
7) Tourism (capex): Investment pipeline closes 2025 at ~$36.7bn across 700 projects
SECTUR reported that its 2025 Tourism Investment Portfolio ended the year with 700 active projects in 30 states, totaling approximately US$36.735bn, and citing a 67% increase in the investment amount (portfolio metric).
This is not just demand—it is potential supply expansion and a forward indicator for construction and services activity in key destinations.
MexStrategy View (brief)
Mexico ended the second half of December with a clear and investable narrative: a gentler monetary stance to protect growth, paired with more assertive trade tools to defend domestic industry.
The macro backdrop is supportive—headline inflation is contained and activity surprised to the upside—while markets closed 2025 with strong conviction in both FX and equities.
The principal risk for early 2026 is second-order: tariffs mechanically raise landed costs, and the key question is how quickly supply chains can adapt without feeding core inflation.
The opportunity is equally concrete: firms that can localize inputs, optimize customs compliance, and protect margins through disciplined hedging will outperform.
Tourism remains a stabilizer—both in cash flow and capex—provided execution constraints (permitting, infrastructure, safety perception) are managed proactively.
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