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A growing wave of uncertainty is freezing investment plans in Mexico, the US’s largest trading partner, rattling domestic and foreign business leaders alike.
Investors are weighing Donald Trump’s decision to impose tariffs on 1 August. The plan so far – levies on Mexican-made cars, steel, aluminum, metal parts and tomatoes. And they are pondering the push by the Mexican president, Claudia Sheinbaum, to overhaul the country’s judiciary in ways critics say undermine legal certainty and could roll back democratic gains.
No wonder they are increasingly unsure how to proceed. Plans to launch new operations in Mexico – or expand existing ones – are being reconsidered, postponed or quietly shelved.
The economic effects increasingly rattle trade and investment decisions all along the US-Mexico border, gnawing at executives’ confidence and potential job growth. Long-term planning proves all but impossible, say business leaders and economic experts.
“Foreign investment is probably lower than it otherwise would have been at this point in the year,” said Tom Fullerton, an economics and finance professor at the University of Texas at El Paso. “It is still not clear whether the Trump administration is going to allow the USA to remain in USMCA [United States-Mexico-Canada Agreement, the free trade agreement negotiated under Trump’s first presidency].”
“It is also not clear how the judicial landscape will change within Mexico.”
With many US and Mexican businesses closely linked, the effects of the policy changes echo across the borderlands. US-Mexico bilateral trade reached an estimated $840bn in 2024.
Already, about 65,000 jobs have been lost in Juárez alone, due to a myriad of factors, including increased factory automation, said Jerry Pacheco, president and CEO of the Border Industrial Association.
“We’ve lost at least three deals since the steel and aluminum tariffs went up to 50% in Santa Teresa, so it creates an uncertain business environment,” Pacheco said. “The US and Mexico economies are so intertwined and depend on each other that if US companies are suffering because of steel and aluminum tariffs, Mexico is gonna suffer also.”
The paralyzed decision-making threatens to weigh heavily on Mexico’s growth prospects – and on Sheinbaum’s legacy as the country’s first female president. The economy has already shown unmistakable signs of a sharp slowdown since late last year.
No clear rebound is in sight here on the border or beyond.
“Everything has been put on hold,” said Víctor González, owner of Solinda, a precision machine-manufacturing company based in the central Mexican state of Aguascalientes, referring to what he hears from colleagues and business associations. “One of the reasons is the reform of the judicial system. The other is tariffs.”
Initially, Trump’s sweeping threats to slap tariffs on all Mexican and Canadian imports forced business owners to recalibrate their south-of-the-border investment strategies. The renewed economic boom Mexico was expected to enjoy – fueled by Trump’s hardline stance on Chinese imports – quickly fizzled.
Rather than benefit from global supply chain shifts, both Mexico and Canada have found themselves caught in the trade-fueled crossfire. Rather than encouraging near-shoring, Trump decided to use tariffs as leverage to pressure both neighbors to crack down on the flow of migrants and drugs, particularly fentanyl.
An indication of possible impacts could be General Motors’ June announcement of a $4bn investment in US factories in Michigan, Kansas and Tennessee. That fits the company’s strategy to revive its US manufacturing footprint, which Trump has demanded.
GM revealed that the Blazer and Equinox, sport utility vehicles that for years have been assembled in Mexico, will be built at plants in Tennessee and Kansas starting in 2027.
GM has made vehicles in Mexico since the 1930s and its expanded production here was touted as an early victor for the free trade agreement between the US, Mexico and Canada in the early 1990s.
The automaker’s move was hailed by the Trump administration as a major victory.
“No president has taken a stronger interest in reviving America’s once-great auto industry than President Trump,” the White House spokesperson Kush Desai said in a statement.
The US administration’s message was clear to many observers – Mexico’s loss is the US’s gain, even if GM must shoulder higher production costs and it could lead to higher prices for consumers.
Though threats eased as the year has proceeded – after Canada and Mexico announced border taskforces and deployed more security personnel – investor confidence has been shaken.
Now, Sheinbaum has realized her predecessor’s dream of radically reshaping Mexico’s judiciary, to the benefit of their all but hegemonic Morena political party. A scarcely attended election in June – turnout was just 11% – replaced career judges, magistrates and supreme court justices with those chosen by popular vote.
Many fear that consolidating control over the courts will erode institutional checks and balances. With judgeships and other judicial posts dominated by ruling party loyalists, arbitrary or ideologically driven rulings may flourish, critics fear. All nine newly elected supreme court justices have ties to Sheinbaum, former president Andrés Manuel López Obrador, or their left-leaning party.
“What investors are looking for is certainty and rule of law,” said Tony Garza, US ambassador to Mexico under the George W Bush administration who now works on trade and other issues at White and Case, a law firm. “What they’re getting with tariff threats and judicial elections is chaos and incompetence.”
Many business leaders, economists and credit-rating agencies fear the country is veering back toward the one-party rule that dominated Mexican politics for most of the 20th century. Mexican politics have been stumbling along since democracy was introduced in 2000.
The judicial reform could “negatively affect the investment appetite and business environment”, Fitch Ratings warned in a report last year. That echoed similar concerns voiced by S&P Global and Moody’s, the world’s other two largest credit-rating agencies.
The economic headwinds are already building, with trouble signs on the border. Fullerton said unemployment rose from 2.2% in 2022 to 3.3% in 2024.
Across Mexico, with an annualized 2.7% economic contraction in the final quarter of 2024 and tepid 0.8% growth in this past winter, labor and public sentiment indicators also paint a troubling picture.
The private sector added little more than 85,000 new jobs between January and June – or more than two-thirds fewer than in the same period last year. That’s the lowest job creation since 2009, not counting the effects of the Covid pandemic, according to the Mexican social security institute.
Consumer sentiment in June fell to a two-year low, while business confidence fell for the 14th month in a row said recently the National Institute of Statistics and Geography (Inegi).
While overall foreign direct investment (FDI) remains positive, the inflow of new capital has all but stalled. Of the $21.3bn in FDI Mexico received in the first quarter of 2025, just $1.58bn – or 7.4% – represented fresh investment projects.
“The truth is, the way things are going – and with recent events like the judicial reform – many are saying this isn’t going to be good,” added González, the factory owner. “That’s more or less the feeling everywhere. Right now, it’s a perception, not yet a reality.”
That new foreign investment is well below the six-year average of 29% recorded during López Obrador’s administration, and it pales in comparison with the nearly 60% share of new capital the country registered at the beginning of this century.
At a recent meeting with business and political leaders from the Texas Lyceum, a non-profit, non-partisan statewide leadership organization, the newly arrived US ambassador, Ron Johnson, was put on the spot with the following question: What is the “purpose” of Trump’s tariffs? After a long pause, Johnson responded, Trump “is a businessman”, he said.
Just in the state of Texas, Mexican trade totaled $540bn in 2024.
“I sincerely believe … he just wants things to be fair, reciprocal,” said Johnson, who said he was a “good friend” of the president. “He wants competition to exist on a level playing field.”
Amid an awkward silence the moderator stepped in to thank the ambassador. Polite applause followed.
This story was co-published with Puente News Collaborative, a bilingual non-profit newsroom, convener and funder dedicated to high-quality, fact-based news and information from the US-Mexico border.
