Latin America’s 2025 Growth Slows to 2% as Mexico Stumbles Under US Tariffs

The engines of Latin America and the Caribbean are sputtering. The International Monetary Fund’s (IMF) stark assessment for 2025 forecasts regional economic growth at a mere 2.0%, a significant downgrade from earlier projections. This disappointing outlook, detailed in the IMF’s April 2025 World Economic Outlook, places the region far behind the faster recoveries anticipated in emerging Asia and Sub-Saharan Africa, largely due to an unexpected drag: Mexico’s sudden economic contraction.

Latin America 2025 Growth: A Region Under Pressure

The downgrade centers squarely on Mexico. Previously expected to contribute positively, Mexico is now projected to see its economy shrink next year. The IMF attributes this sharp reversal primarily to the impact of new US tariffs and escalating uncertainty surrounding trade relations. These measures have rendered Mexican goods more expensive for crucial US buyers, forcing businesses to scale back operations, freeze hiring, and delay expansion plans. U.S. tariffs have made Latin American goods more expensive for buyers, causing businesses to pull back,” the data implies, highlighting the direct link between trade policy and economic health. Brazil, the region’s largest economy, fares only slightly better, forecast to eke out growth of barely 2%, reflecting persistent domestic challenges and the knock-on effects of the broader regional slowdown.

Contrasting Fortunes: Argentina Shines Amidst Gloom

While Mexico falters and Brazil stagnates, Argentina emerges as the region’s surprising bright spot. The IMF forecasts growth exceeding 5% for Argentina in 2025. This robust performance is credited to the government’s implementation of strict economic reforms and bolstered by substantial new financial support from the IMF itself. This divergence underscores how domestic policy choices and international backing can significantly influence outcomes even within a challenging regional context. Argentina’s performance, however, is not enough to lift the overall regional average out of its low-growth trajectory.

The Global Context Widens the Gap

The IMF report underscores how Latin America’s struggles contrast sharply with other developing regions. While the United States and Europe are also facing sluggish growth – projected at barely 2% and 1.2% respectively – emerging Asia and Sub-Saharan Africa are powering ahead. India, a standout in Asia, is forecast to grow above 4.7%. Latin America faces distinct barriers hindering its factories and farms from exporting at needed volumes. As the US and EU slow, demand weakens further for the region’s key exports. “These numbers tell a bigger story,” the data suggests, pointing to structural issues and external dependencies that leave Latin America particularly vulnerable to shifts in global trade winds and policy decisions made in major economies like the United States.

The consequences of this slowdown extend far beyond statistics. Fewer jobs, rising prices, and potential cuts to public services threaten to squeeze family budgets across the region. Global supply chains, reliant on parts from Mexico, agricultural products from Brazil, and minerals from Chile, face disruption when trade rules shift abruptly. The interconnectedness of the global economy means that Latin America’s stumble has ripple effects worldwide.

The IMF’s 2% forecast for Latin America in 2025 paints a picture of a region facing significant headwinds, led by Mexico’s tariff-induced contraction. While Argentina offers a lesson in reform potential, the overall outlook demands attention. Policymakers across the hemisphere face the urgent challenge of navigating external pressures while fostering domestic resilience to protect jobs, stabilize prices, and reignite sustainable growth. Monitor policy responses closely as the region navigates this critical economic juncture.

Must Know

What is causing Latin America’s slow growth in 2025?
The primary driver is Mexico’s unexpected economic contraction, triggered by new U.S. tariffs and heightened trade uncertainty. This drags down the regional average significantly. Broader factors include slowing demand in key markets like the US and Europe, and structural barriers limiting export potential for other regional economies.

Why is Mexico’s economy shrinking according to the IMF?
The IMF’s April 2025 World Economic Outlook attributes Mexico’s projected contraction directly to the impact of new U.S. tariffs. These tariffs make Mexican exports more expensive and less competitive in their largest market, leading businesses to cut back on investment and hiring, stifling economic activity.

How does Argentina’s forecast differ from Brazil and Mexico?
Argentina is forecast by the IMF to grow over 5% in 2025, a stark contrast to Mexico’s contraction and Brazil’s anemic ~2% growth. Argentina’s stronger performance is linked to strict government economic reforms and substantial new financial support received from the IMF itself.

How does Latin America’s growth compare globally in 2025?
Latin America’s 2% projected growth lags far behind other developing regions. Emerging Asia and Sub-Saharan Africa are experiencing faster recoveries. For example, India is forecast to grow above 4.7%. The US and Europe are also sluggish but remain larger, more stable economies.

Why should people outside Latin America care about this slowdown?
The slowdown impacts global supply chains, as the region is a key source of manufactured parts, agricultural products, and minerals. Disruptions can lead to higher prices and shortages elsewhere. Economically, it represents weaker global demand and highlights risks from protectionist trade policies like tariffs.