The T-MEC's Uncertain Future in a World of Trumpian Economics

With Donald Trump poised to return to the White House, the global economic landscape faces uncertainty, volatility, and risk. As political and financial observers look toward 2025, experts agree that we are entering uncharted waters. Economists from Mexico’s National Autonomous University (UNAM) Institute of Economic Research (IIEc) have weighed in on what this could mean for Mexico, the United States, and the interconnected economies of North America.

“What is certain is that uncertainty will dominate the economic environment,” said César Armando Salazar López, a researcher with the Coordination of Prospective Macroeconomic Analysis. In an interview, Salazar predicted a slowdown in economic growth for Mexico, compounded by a less severe but noticeable deceleration in the United States. His assessment underscores the fragile nature of economic recovery post-pandemic and the vulnerability of global markets to political shifts.

Among the key policies expected under a Trump administration, one proposal has garnered particular attention: a renewed push to cut corporate taxes. Trump’s earlier tenure saw a significant reduction in the corporate tax rate, a move intended to boost business investment and economic growth. While the immediate effects were mixed, economists like Salazar argue that a similar strategy in 2025 could yield short-term gains but may ultimately destabilize financial systems, especially if paired with deregulation.

“Deregulation is attractive for markets, particularly cryptocurrencies, which have already surged following Trump’s electoral victory,” Salazar explained. The digital asset space, long a point of interest for figures like Elon Musk—the world’s richest man and vocal supporter of cryptocurrency—stands to benefit. With Musk rumored to hold a prominent role in Trump’s cabinet, crypto investors are banking on a friendlier regulatory environment. Yet Salazar warns that such policies carry significant risks.

“Deregulation can foster financial crises,” he said. “In the medium and long term, monetary and financial authorities may lose control. Cryptocurrencies, as highly volatile assets, lack a stable reference and could create dangerous bubbles.”

The T-MEC Trade Agreement and Tariff Threats

For Mexico, Trump’s potential return brings back memories of tariff threats and trade disputes. Mexico sends roughly 85% of its exports to the United States, making the U.S. its most critical trading partner. During Trump’s first administration, threats of tariffs loomed large, raising fears of disruption to cross-border value chains. Although the United States-Mexico-Canada Agreement (T-MEC) offers a legal framework to contest such measures, Salazar noted that Trump’s combative style adds a layer of unpredictability.

“Trump has shown he’s willing to act unilaterally, even if it means breaking international agreements,” Salazar said. “That’s where the uncertainty lies.”

Should tariffs materialize, they would disrupt the intricate supply chains that crisscross North America, increasing costs for businesses and consumers alike. Many goods manufactured in Mexico make multiple border crossings before reaching their final destination. Disrupting these flows would not only hurt Mexico’s economy but also strain U.S. businesses reliant on cost-effective production.

“The hope is that these threats remain just that—threats,” Salazar added. “A full-blown trade war would harm both countries.”

While uncertainty looms for most, there are clear winners emerging from Trump’s victory. Shares of Tesla, Elon Musk’s electric vehicle company, have soared on the expectation of favorable government support. Musk’s proximity to Trump and his influence in shaping policy could further benefit industries like electric vehicles, space exploration, and digital assets.

On the other hand, volatility in currency markets has cast a shadow of instability. César Duarte Rivera, a fiscal and financial economics researcher at UNAM, predicts that the dollar’s value will fluctuate significantly until Trump’s economic policies become clearer.

“The instability in the exchange market could persist for weeks or months,” Duarte said. “This isn’t just about Trump’s victory—it’s a combination of factors, including the Federal Reserve’s decision to cut interest rates.”

Duarte noted that while the peso’s recent fluctuations have been noticeable, they remain within a manageable range. The peso’s movement around 20 pesos per dollar, while pronounced, has not spiraled into extreme depreciation.

“There is relative stability, though the trend is slightly more volatile than in recent weeks,” Duarte added.

Remittances and Labor Markets

One of Trump’s hallmark policies—a crackdown on immigration—could carry severe economic consequences for Mexico. Remittances from Mexican workers in the U.S. represent a vital source of income for millions of families. If deportations rise and immigration is curtailed, remittances will decline, increasing financial hardship in Mexico’s most vulnerable regions.

“Deportations would push unemployment higher and create downward pressure on wages,” Duarte warned. “The labor market in Mexico would face significant strain.”

The expected economic fallout underscores the need for Mexico to reduce its dependence on the United States. Duarte stressed the importance of diversifying trade relationships and fostering domestic industrial development.

“Mexico must prioritize its own technological advancement and look for alternative partners in China, Europe, and Latin America,” he said. “Relying too heavily on a single partner leaves us vulnerable.”

Given the unpredictable landscape ahead, Duarte and Salazar offer a common piece of advice to the public: caution. While saving money is a luxury for many, they emphasize the importance of prudent financial planning.

“Avoid unnecessary purchases and be foresighted,” Duarte urged. “Uncertainty is the only certainty we have.”

For Mexico, the road ahead is fraught with challenges. Trump’s return could trigger economic shifts that reverberate far beyond the border, affecting trade, labor markets, and financial stability. Yet within this uncertainty lies an opportunity: a chance for Mexico to forge new partnerships, strengthen its industrial base, and chart a path toward greater economic resilience.

As 2025 approaches, one thing remains clear: the world is watching, and Mexico must prepare for whatever comes next.