Mexico Is Growing More Slowly Than the United States: It’s Exporting More, but Investment Is Cooling and AI Is Reshaping the Cycle
Stronger export momentum has not been enough to offset weak investment and the smaller spillover from U.S. growth into Mexican manufacturing.
For decades, Mexico’s economy moved in step with that of the United States: when its northern neighbor accelerated, Mexico typically mirrored part of that momentum through manufactured exports, remittances, tourism, and investment flows. In recent quarters, however, that relationship has shown cracks: while the U.S. has maintained a relatively solid expansion, Mexico has alternated between periods of stagnation and contraction—evidence that the “external engine” is no longer enough to sustain domestic growth.
Recent data reflect the divergence. Mexico has posted quarters with declines or only marginal gains, even as the U.S. economy has grown at rates Mexico has not been able to sustain since 2023. In the latest reading, activity in Mexico contracted quarter over quarter and barely advanced year over year, while the United States kept expanding—supported by resilient consumer spending and, above all, by corporate investment that is reshaping the growth pattern toward technology and artificial intelligence.
The paradox is that Mexico’s external front doesn’t look weak: exports have posted sizable gains, led by manufacturing and by segments tied to electrical equipment, electronics, and computing, helped by geographic proximity and preferential conditions versus other countries. Even so, the higher export flow has not translated into a proportional rebound in GDP, suggesting a deeper issue: lower investment, weak productivity growth, and a U.S. cycle that is being transmitted less automatically to the Mexican economy.
The government has said the performance reflects external pressures—from changes in U.S. trade policy to geopolitical conflicts. While those factors matter for costs, logistics, and expectations, the diagnosis emerging from the financial sector points to a more persistent domestic picture: weakened fixed investment, business caution amid regulatory and trade uncertainty, and consumption losing steam as formal employment and the real wage bill moderate.
In that context, Mexico faces an additional challenge: U.S. growth is relying less on demand for traditional manufactured goods and more on services, public spending, and tech investment. That shift reduces the “multiplier” that historically benefited Mexico’s manufacturing base when the U.S. economy sped up, and it forces Mexico to compete for more value added, deeper local supplier integration, and new industrial capabilities.
Investment in Mexico: the red flag behind the decoupling
Fixed investment in Mexico has shown prolonged signs of weakness, with episodes of contraction and a more defensive business mood. The consequence is not just slower growth in the short term: when investment slows, it also limits technology adoption, capacity expansion, and potential growth. The problem is compounded in a country where labor informality remains high and productivity has inched forward slowly for years. With less investment, the country risks sliding into a low structural-growth dynamic: less capital per worker, less innovation, and a domestic market that depends more on immediate consumption than on sustained productivity gains.
Even with opportunities such as nearshoring, relocation does not happen automatically. It requires sufficient power and logistics infrastructure, security, regulatory certainty, faster permitting, and a strategy to develop domestic suppliers. Without those elements, some investment arrives selectively—into specific enclaves and industrial corridors—but without the broad spillover effects that would boost jobs, industrial construction, and services across the country.
In addition, the debate around the USMCA has become a central component of uncertainty. For many companies, the review and tightening of criteria—such as rules of origin, regional content, and verification mechanisms—could change costs and location decisions. When that outlook isn’t clear, the typical response is to pause or pace investments, particularly in capital-intensive sectors like automotive, which remains an export pillar but faces pressure from targeted tariffs, technological change, and supply-chain adjustments.
The industrial reshuffling also comes with an uncomfortable takeaway for Mexico: export growth can be concentrated in assembly processes with high imported content, which lifts the value of exports but leaves a limited impact on domestic value added. In other words, Mexico can export more without that necessarily showing up as a robust expansion in GDP, employment, or domestic investment—especially if local integration of inputs and services remains low.
In the United States, private investment tied to equipment, software, and intellectual property products—linked to digitization and artificial intelligence—has taken center stage. That push raises productivity and can sustain higher growth rates in the medium term. For Mexico, the challenge is twofold: capture U.S. demand in tech-related segments without getting stuck in low-value-added links, while also reigniting domestic investment to lift productivity, technical capabilities, and national content.
Looking ahead, the outlook will depend on whether Mexico can rebuild confidence for productive investment, accelerate infrastructure projects—particularly in energy and transportation—and strengthen the conditions needed for nearshoring to translate into deeper supply chains inside the country. Macro stability will also be key: controlled inflation, credible public finances, and a financial environment that enables credit and investment. In that equation, U.S. performance will still matter, but Mexico’s growth will increasingly depend on its ability to turn external momentum into internal development.
In short, faster growth in the United States no longer guarantees an equivalent lift for Mexico: with weakened investment and exports that do not always generate high local value added, the country faces the challenge of raising productivity and strengthening certainty to return to more solid growth.
