By Gabriel Burin

BUENOS AIRES (Reuters) – Mexico’s economy will remain sluggish this year, a Reuters poll of economists found, as the country prepares for a possible radical change in U.S. tariffs and migration rules that can cause vision impairment.

Private spending and investment, already weakened by this high uncertainty and high interest rates, are likely to receive some support from measures aimed at low wages and some industrial sectors.

But Mexicans await the inauguration of US President-elect Donald Trump on January 20 to see if he follows through on a threat to impose a 25% tariff on goods crossing the border. Mexico currently has a free trade agreement with the US and Canada.

In Mexico, the No.2 economy in Latin America after Brazil, the gross domestic product is set to expand by 1.2% in 2025 compared to 1.6% last year, according to the median estimate of 32 economists surveyed in January 9-16.

“Growth prospects are weighed down by three main factors: reduced private consumption strength, weak export performance, and reduced fixed investment influenced by US political uncertainty and the legislative agenda in Mexico,” wrote Pamela Diaz Loubet, Mexico economist at BNP Paribas (OTC:).

“Although nearshoring remains a long-term opportunity, political noise and investor reluctance have delayed expected capital inflows, once seen as drivers of recovery.”

The administration of Mexican President Claudia Sheinbaum has signaled that it hopes to avoid tariffs that Trump has threatened with actions on illegal immigration and drug trafficking to ease US concerns.

In another apparent nod, Mexico presented a plan to curb imports from China following Trump’s allegations that it has become a back door for Chinese goods entering the United States.

But despite a government currently focused on fiscal restraint and global bond yields on the rise, the poll suggests that the central bank, Banxico, has limited room to ease policy more aggressively to support activity in a worst case scenario.

The bank cut its benchmark rate to 10% from a record high of 11.25% in a five quarter-percentage point move last year. It is projected to decrease another 150 basis points to 8.50% by the end of 2025, the poll median shows.

Asked how the central bank would react if Washington announced new tariffs on Mexico this month, seven out of 11 respondents said it should maintain the expected path for monetary easing.

Three said it would cut rates less than expected, while only one expected a deeper cut.

“Although higher tariffs will add to the headwinds of Mexico’s growth, the immediate response is the maximum continuation of the pace of cuts – no acceleration of 50 basic movements,” said Alberto Ramos , head of Latin American economic research at Goldman Sachs.

“It will be difficult for Banxico to continue a very dovish path. By doing so they will get a negative reaction in the market that may lead to tighter than looser financial conditions, and soon force the central bank to return to a conservative stance.”

(Other stories from Reuters global economic poll)

(Reporting and polling by Gabriel Burin in Buenos Aires; additional reporting and polling by Noe Torres in Mexico City; Editing by Ross Finley and Tomasz Janowski)