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LATAM: Natixis Says Mexico Most Vulnerable To US Tariffs

LATAM
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  • Comparing the degree of openness of the Latin American economies, Natixis says that it is clear that Mexico is significantly more exposed to a trade war than the rest of the region. Together, imports plus exports amount to almost 85% of GDP in Mexico, according to their calculations, as compared to 56% in Chile and 49% in Peru.
    • With a more closed economy, they note that Argentina is somewhat shielded from US tariffs. Commodity-dependent nations like Brazil, Chile, and Peru may face significant challenges if global commodity prices fall, particularly due to a China slowdown and strengthening dollar. Similarly, Colombia, may also be adversely affected if US policies lead to lower oil prices.
    • Natixis analyses the impact of a 10% tariff imposed by the US on imports from the largest Latam economies. The impact on Mexico's GDP growth is significant, ranging from -1.0ppt in 2027 GDP to -0.6ppt in 2028. For the other countries, the impact on 2027 GDP is smaller, but not insignificant, ranging from -0.06ppt in Brazil to almost -0.2ppt in Peru.
    • Natixis emphasises that commodity-producing countries may experience more significant indirect effects, for example due to tariffs imposed on China or tariffs on specific commodities that may affect global commodity prices.
    • They note that the Peterson Institute estimates that a 25% tariff could put Mexico's GDP on a permanently lower growth path, with the impact of up to -0.19% in the first year, rising to between -1% and -2% from year three for every year over the next decade.
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  • Comparing the degree of openness of the Latin American economies, Natixis says that it is clear that Mexico is significantly more exposed to a trade war than the rest of the region. Together, imports plus exports amount to almost 85% of GDP in Mexico, according to their calculations, as compared to 56% in Chile and 49% in Peru.
    • With a more closed economy, they note that Argentina is somewhat shielded from US tariffs. Commodity-dependent nations like Brazil, Chile, and Peru may face significant challenges if global commodity prices fall, particularly due to a China slowdown and strengthening dollar. Similarly, Colombia, may also be adversely affected if US policies lead to lower oil prices.
    • Natixis analyses the impact of a 10% tariff imposed by the US on imports from the largest Latam economies. The impact on Mexico's GDP growth is significant, ranging from -1.0ppt in 2027 GDP to -0.6ppt in 2028. For the other countries, the impact on 2027 GDP is smaller, but not insignificant, ranging from -0.06ppt in Brazil to almost -0.2ppt in Peru.
    • Natixis emphasises that commodity-producing countries may experience more significant indirect effects, for example due to tariffs imposed on China or tariffs on specific commodities that may affect global commodity prices.
    • They note that the Peterson Institute estimates that a 25% tariff could put Mexico's GDP on a permanently lower growth path, with the impact of up to -0.19% in the first year, rising to between -1% and -2% from year three for every year over the next decade.