I hope that readers are doing well and that they have the life jacket we need in these stormy times. The uncertainty felt around the world remains the most significant factor in the economic sector and everyday life. President Trump has completed 100 days in the White House, and the number of initiatives and changes he has made is unprecedented. It is evident that his intention is not to “reshape” the government, but to create a new institution, and to achieve this, it is necessary to demolish much of what existed before. I think it’s still too early to evaluate the results, but the speed of change has caused his popularity to plummet from over 60% to around 40% now.
The tariff program has not yet gotten off the ground, but it has already had a significant impact on the results of companies that are no longer willing to forecast their future earnings. The 0.3% contraction in GDP during the first quarter of the year is complicating investors’ decisions to commit to new facilities, and they are waiting for the future of the relationship between the United States and the rest of the world to become clearer. The fall in GDP is explained by the fact that imports are deducted from the growth calculation. Many people anticipated the start of tariffs and imported much more than they would typically bring into the country.
The US economy is showing mixed trends, with manufacturing holding up well, the construction industry very weak, with a contraction of almost 40% in industrial and 7% in residential, retail trade with good reports but poor forecasts for the future, and inflation sustained at 3%, but with negative expectations on the part of consumers. The consumer confidence index has fallen 19 points to 46, the lowest level since the pandemic reached its peak. The number of unemployed people who cannot find work is at its highest level since February 2022.
President Trump spoke very negatively about Federal Reserve Chairman Jerome Powell for his refusal to lower interest rates. He even threatened to fire him, a prerogative not allowed by law, but the next day, he said he would let him serve out his term, which ends in May 2026. The Fed is in a challenging position, as it has the dual role of fighting inflation and promoting economic growth. Mixed signals indicate that if it lowers rates, inflation is likely to rise, and if it raises them, the economy is likely to slow down, and unemployment is likely to increase. Added to this situation is the uncertainty surrounding tariffs and their impact on prices.
Following the announcement of the tariffs, many countries have approached the United States to negotiate a reduction or elimination of the tariffs. However, the leading trade adversary, China, is taking an uncompromising and antagonistic stance. When two egotistical leaders, accustomed to always winning, face each other, it is not easy to find a solution. Especially since Trump must respect the judicial and legislative powers, and Xi is a dictator with a lifetime mandate who can do as he pleases.
The United States has already restricted exports of the most advanced semiconductors, and China has responded by limiting the sale of rare earth materials, which are essential for manufacturing batteries and other highly sophisticated scientific products that China has a monopoly on. China has also banned its companies from investing in new facilities in the United States.
As of May 1, 2025, tariffs would be 23.6% on all imports, compared to 2.4% before the current administration took office. This figure is the highest since 2010, and in many sectors, it is the highest in history. It is curious that in this trade war, the United States has excluded the surplus in service exports, which amounts to $227 billion annually, reducing the combined trade deficit by more than 50%.
The United States will attempt, through individual negotiations with each country, to get the rest of the world to impose tariffs on imports from China. If it fails to do so, other trade alliances are likely to form, leaving the Americans out without a significant loss for the Chinese.
The birth rate report for the United States in 2024 has been released, and the figures are quite alarming. There were 3.46 million births, 1.61 per woman. If the number is less than 2.1, it represents a contraction in the population. This figure is similar to that in Europe when it opened its doors to Muslim immigration, which has now become a serious problem for the old continent. The United States has already deported 66,000 undocumented immigrants and is just getting started, so it is vitally important to create a new immigration law to allow more people to come and live in the country, people who are properly checked and validated and who enter legally.
As a result of the tariff dispute, tourism to the United States has declined by 21% (a 70% drop among Canadians), a figure that has a significant impact, as it represents $90 billion, or 0.3% of GDP. The United States must maintain the attractiveness of its currency, which accounts for 73% of the world’s reserves, as it will need to sell $10 trillion in government debt in 2025. This includes $8 trillion to refinance maturing debt and $2 trillion to cover the operating deficit.
I find it interesting to comment on the dispute between the White House and the country’s leading universities. The government gives large amounts of money to universities for research, etc., and has threatened to suspend this funding because of their anti-Semitic practices and liberal stance, which encourages populism and anti-government sentiment. In addition, the government threatened to revoke Harvard’s ability to receive tax-deductible donations and to start charging normal taxes on the profits from its $53 billion investment fund. Harvard sued the government, accusing it of trying to interfere with its admissions process, curriculum, and independence. It is unclear how this will end, but an internal Harvard study published on April 30 confirms that the university did encourage anti-Semitic practices and did not adequately protect students, in addition to professors joining last year’s protests.
Some data that I found interesting is that the wealthiest 1% of the country owns 31% of the wealth, and the richest 10% owns 67% of the total. The increase in the net value of mortgages on all homes in the country was 80% from 2020 to 2025, representing the most important component of Americans’ wealth. The average income in the United States is $34.31 per hour, and in manufacturing, it is $27.11 per hour. This is a clear example of why it is very difficult to compete against countries that earn hardly that much per day, let alone per hour.
The IMF’s growth forecast for next year is 1.7% in the US and 4.5% in China. In the US, job creation is expected to average 55,000 new workers per month, which is expected to bring the unemployment rate down to 4.7% from its current level of 4.2%. California would be the fourth-largest economy in the world if it were an independent country, surpassed only by the United States, China, and Germany, having overtaken Japan, which was previously in fourth place. An interesting fact about Elon Musk is that all the savings he has found in unnecessary government spending amount to 27% of what he has lost in capitalization at Tesla, the company he has “neglected” due to his activity in DOGE.
Moving on to Mexico, before listing the positives and negatives of the month, I would like to mention that President Sheinbaum’s decision not to confront Trump and remain quiet has apparently been wise. Mexico could greatly benefit from this trade war. Except for steel, aluminum, the automotive industry, and tomatoes, Trump appears to be respecting the USMCA free trade agreement. Although the aforementioned sectors are very important, I believe they will achieve considerable reductions.
There is no doubt that the Mexican economy is picking up, and only a good increase in agricultural exports prevented a negative first quarter, reporting a meager 0.1% increase. Manufacturing, consumption, and investment reports have declined, and I hope this is a response to prevailing uncertainty rather than a long-term trend.
Positives:
· Reserves reached $239.1 billion, the highest point in history and an extraordinary shield against further devaluation.
· The CETES rate is at 8.8%, the lowest in 2.5 years.
· Mexico was not subject to reciprocal tariffs despite the uneven trade balance.
· Both airports and Volaris reported increases of more than 10% in volume.
· Reports of large foreign investments continued this month, with Unilever investing $800 million.
· Sheinbaum’s economic development plan of April 8, with significant subsidies for manufacturing and an invitation to energy partnerships.
· The SAT increased its collection by 17.8% compared to the same quarter last year.
· Significant increase in production to take advantage of exports before the imposition of tariffs.
· One positive aspect amid the negative aspects of the new telecommunications law is that it imposes a very high level of censorship. The president asked the Senate not to discuss the law, as its language will be modified.
· The trade surplus in March was $3.44 billion, higher than the projected $2.85 billion. Exports were $55.5 billion and imports $52.1 billion.
Negatives:
· Remittances in 2024 were lower than in 2023.
· The GDP growth forecast was reduced from 0.8% to 0.5% for 2025 and from 1.6% to 1.5% for 2026. The Ministry of Finance continues to use a forecast of between 1.5% and 2.3%. The IMEF expects the figure for 2025 to be only 0.2% higher, and Banamex forecasts a negative result.
· The business confidence index is at its lowest point in 26 months, consumer confidence is at its lowest in 21 months, and foreign investor confidence fell from 27 to 25.
· The insecurity survey indicated that 69.9% of people in Mexico feel unsafe going out on the streets, with a range from 90.9 in Villahermosa to 10.4 in San Pedro Garza Garcia.
· Large companies that supply products and services to PEMEX, such as SLB and Halliburton, reported lower consumption and that they are not being paid.
· The Bank of Mexico delivered much less than expected to the federal government, $18 billion pesos against the projected $110 billion, due to its need for capitalization to replenish foreign exchange losses from previous years.
· Walmex reported its worst quarterly growth in five years.
· CFE had a loss of $271.5 billion pesos in 2024 and PEMEX 1.624 trillion pesos, bringing its debt to $101 billion dollars.
· Mexico’s total debt in dollars amounts to $902 trillion, 10.3% more than a year ago.
In the rest of the world, Israel maintains its growth forecast of 3.5% in 2025 and 4% in 2026, subject to Trump’s threatened 17% tariffs not coming into effect, primarily since Israel does not impose any taxes on US products. The most serious problem is the resumption of war in Gaza, as Hamas does not seem willing to surrender and has recruited many new terrorists. It should be mentioned that during Netanyahu’s visit to the White House, an announcement was expected on how to stop Iran and its progress in obtaining an atomic bomb. Still, Trump decided to seek a negotiated solution rather than a military one. A total boycott was imposed on countries that buy oil from Iran, and they will not be able to have trade relations with the United States.
Trump wants to take advantage of Iran’s precarious economic situation and popular discontent to achieve a peaceful settlement. The fact that Iran can produce enriched uranium to make a bomb in just a few weeks and have a bomb in 4-6 months puts the world in danger if something is not done quickly.
The International Monetary Fund has forecast global growth of 2.8% for 2025 and noted that global oil demand is expected to fall by almost 3 million barrels per day. Europe seems to have fewer problems with tariffs, as 65% of its trade is within the Union, and of the remaining 35%, only 17% is with the United States. England reported its lowest growth since leaving the European Union, while Spain was the country with the best growth in 2024 and has maintained this position so far in 2025. Germany is trying to avoid a recession, but its unemployment has been rising, and its dependence on exports puts it in a vulnerable position. Brazil is experiencing a sharp rise in inflation and is one of the few economies that continues to raise interest rates to combat rising prices.
In terms of portfolios, stock markets had a difficult April, with a sharp decline in the first half of the month, followed by a recovery of about half of the decline in the second half. The S&P 500 index of the 500 largest US companies is 7.3% below its level on the day of Trump’s inauguration, and large technology companies are down 13.4%.
Bonds had a good month as interest rates fell due to the slowing economy, although private corporate instruments and so-called junk bonds did not fare as well, as the perception of increased risk dampened their growth. The dollar lost strength against almost all currencies and has declined by nearly 9% against major economies. Gold reached an all-time high of $3,458 per ounce but has returned to $3,233 today. Bitcoin fell to $85,400 but has already recovered to $96,900.
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