After all the focus on tariffs in 2025, Mexico closed the year with a surprising result: A record trade surplus with the United States, 20% larger than in 2024. The story of how this happened reveals several interesting truths about the Mexican economy, and may also be a key to understanding how bilateral trade ties will evolve in 2026.
The Trump administration, which has made reducing trade deficits a core priority across the board but targeted Mexico as a specific area of focus, imposed a series of tariffs throughout the year despite the United States-Mexico-Canada Agreement or USMCA. These included a temporary 25% tariff on many Mexican exports, although exemptions were granted for products that complied with USMCA rules of origin.
Steel and aluminum were also taxed early in the year, with levies of 25% and 10%, respectively, while non-U.S. components used in automobiles faced a 25% tariff. Trade negotiations between the two governments have taken place since March 2025 and have yielded some exemptions. However, Mexico remained subject to these measures justified by the U.S. on national security grounds related to fentanyl trafficking and irregular immigration.
Despite these measures, Mexico not only posted a larger trade surplus with the U.S. but a significant improvement in its overall trade balance, with a surplus of $771 million. That was a contrast with previous years in which Mexico averaged an overall deficit of about $20 billion annually.
Here are four factors that help explain the shifts in Mexico’s trade profile:
1) Front-loaded exports
The first factor was front-loaded purchases by U.S. importers. Many companies accelerated their purchases from Mexico ahead of tariff implementation. These purchases included not only finished goods but also intermediate and semi-processed inputs—such as aluminum, paper and plastics—that could later be completed in the U.S.
This dynamic helps explain the more than 8% year-over-year increase in Mexican exports to the U.S. in March, nearly double the average growth recorded in 2024. Mexico’s monthly trade surplus with the U.S. reached almost $25 billion, compared with about $21 billion a year earlier.
2) Compliance with USMCA rules
A second factor was Mexican exporters’ response to USMCA rules of origin.
U.S. tariffs on goods that did not comply with these rules made it difficult for Mexican exporters to remain competitive in the U.S. market. In response, the Mexican government took steps to help exporters meet the agreement’s requirements.
As a result, the share of exports complying with USMCA rules increased sharply—from 45% in February, just before the tariffs took effect, to 86% in November. Manufacturers rushed to obtain certification so their products could continue entering the U.S. market duty-free.
This increase in compliance helped reduce the impact of tariffs and supported continued growth in Mexican exports.
3) Diversifying export markets
A third factor was Mexico’s effort to redirect some exports to other markets, even though around 85% of Mexican exports are still sold in the U.S.
Canada became a particularly important destination. Mexican exports to Canada increased 17% last year, boosting Mexico’s trade surplus with that country by nearly $4 billion.
Mexican exports to Europe also expanded, particularly to Belgium and the U.K., helping narrow Mexico’s trade deficit with Europe by about $5 billion.
Meanwhile, Mexico increased exports to several Asian markets—including Indonesia, Taiwan and Hong Kong—where shipments rose by 645%, 156% and 88%, respectively. Despite these gains, Mexico continued to report an overall trade deficit with Asia.
Another notable result is that, despite the Mexican peso’s appreciation throughout the year, the country’s imports from the U.S. did not rise, even as U.S. products became cheaper for Mexican consumers. If this import trend continues—even with further U.S. dollar depreciation and the ratification of the USMCA—we may be witnessing a structural shift in consumer preferences in Mexico. If so, the shift toward buying local could be collateral damage of the aggressive U.S. protectionist policies.
4) Import controls and weaker domestic demand
A fourth factor was a decline in imports. Mexican authorities implemented measures to limit imports that were not essential for the production process and could potentially be replaced with domestic products.
Officials also imposed barriers on certain imports from China, including tariffs and the confiscation of illegal merchandise.
Another element was the prolonged weakness of Mexico’s domestic economy, which reduced demand for imported inputs. Imports declined from several regions, including Europe, the U.S. and Canada. Purchases from Hong Kong dropped by about 50%, while imports from China rose only 3%.
Taiwan was a notable exception. Mexico’s exports to Taiwan jumped by nearly 160% in 2025, and imports increased by a similar amount, strengthening trade ties in both directions.
Implications going forward
The tariff landscape continues to evolve. In February, the U.S. Supreme Court ruled against several tariffs imposed in 2025 under the International Emergency Economic Powers Act (IEEPA). The ruling eliminated a 35% tariff linked to immigration and fentanyl concerns that had affected Mexican exports not compliant with USMCA rules.
In addition, a newly announced 10% global tariff will apply only to non-compliant Mexican goods—affecting roughly 15% of Mexico’s exports to the U.S. Meanwhile, the U.S. administration is considering additional measures, including raising the tariff to 15% under Section 122 of the Trade Act. That tariff would be limited to 150 days unless Congress approves an extension.
There are several potential implications. On the one hand, Mexico’s trade surplus highlights the strong economic ties and supply chain interdependence between the two countries, underscoring the potential costs to the U.S. of ending the trilateral trade agreement.
On the other hand, the tariff’s failure to correct the U.S. negative trade imbalance with Mexico could frustrate U.S. policymakers. This frustration may lead to more aggressive negotiations with Mexico, including stricter rules of origin, reducing imports from outside the region, and enhancing national security collaboration, among others.
Despite tough negotiations and frictions, the likelihood that all three countries will ratify the USMCA is greater than the likelihood of its termination.
ABOUT THE AUTHOR
Alfredo Coutino
Reading Time: 4 minutesCoutino is the Director for Latin America at Moody’s Analytics, where he has served as the region’s Chief Economist since 2005. He has also worked for the Center for Economic Forecasting of Mexico and the Wharton Econometric Forecasting Associates.
