How would a collapse of USMCA affect Mexico?

A key risk for Mexico from the US election is that a Trump administration could withdraw from the USMCA free-trade agreement. In a plausible scenario in which Mexico were to face a universal import tariff of 10%, the peso would fall sharply (perhaps to 23-24/$) to cushion the loss of competitiveness although GDP growth would still slump. Crucially, Mexican policymakers have no room to support the economy. Fiscal policy needs to tighten (regardless of what happens north of the border) and peso depreciation might force Banxico to reverse its easing cycle. Nearshoring optimism would be severely dented, but not dead – particularly if higher tariffs are imposed on China which could encourage Western firms to shift operations out of China to Mexico.