Financial analysts in Mexico were caught off guard as sweeping tariffs on exports to the United States took effect. Despite widespread predictions that such measures would be avoided, the White House proceeded with a 25% tariff imposition on both Mexican and Canadian goods starting March 4. This decision has shaken the confidence of experts who had dismissed the likelihood of prolonged economic sanctions. The impact on Mexico's currency, coupled with concerns over potential GDP contraction, has led to revised forecasts about the country's economic outlook for the coming years.

In a dramatic turn of events, President Donald Trump invoked the International Emergency Economic Powers Act (IEEPA) late Monday night, citing national security concerns as justification for the tariffs. Earlier in the day, Trump had warned reporters that there was "no room" for negotiation, signaling his intent to move forward despite previous attempts to delay the measures. These tariffs, which many experts believed would either not materialize or remain selective and short-lived, have instead ushered in an era of uncertainty for trade relations between the U.S., Mexico, and Canada.

The financial sector in Mexico had long been skeptical of the possibility of broad tariffs being enforced. Analysts like Gabriela Siller Pagaza from Banco Base had initially downplayed the likelihood of such actions, arguing that last-minute interventions would likely prevent their implementation. However, the reality of the situation now forces them to reconsider their stance. Should these tariffs persist, Mexico's GDP could experience a significant contraction, potentially leading to a severe recession by 2025.

Even seasoned negotiators misjudged the situation. Ildefonso Guajardo, former Secretary of Economy under Enrique Peña Nieto, confidently predicted specific rather than general tariffs during a television interview just days before the announcement. Similarly, BBVA México echoed this sentiment, dismissing the idea of long-term enforcement. Yet, the tariffs are now a reality, leaving many to question whether they will indeed be temporary or become a lasting feature of North American trade dynamics.

Mexican markets have reacted swiftly to the new tariffs, with the peso experiencing notable depreciation. Analyst Quasar Elizundia noted that heightened tensions between the two nations have driven the peso above 20.9 per dollar, reflecting growing uncertainty about Mexico's economic future. Meanwhile, Canada has already retaliated with its own tariffs on U.S. goods, while Mexico awaits further instructions from President Claudia Sheinbaum, who is set to address the nation this Sunday.

As the days unfold, volatility and unpredictability seem destined to dominate the financial landscape. With direct negotiations rumored but unconfirmed, the fate of Mexico's economy remains uncertain. For now, all eyes are on how governments and markets adapt to this unprecedented shift in trade relations, hoping for resolution before deeper economic repercussions take hold.