America First may be a boon for Walmart’s Mexican business

The same can be said of the company that runs these capitalist wonders, alongside neighbourhood Bodegas Aurrerá and Sam’s Club membership-only big-box stores, across all 32 Mexican states (and in Central America). Walmart de México, or Walmex, is majority-owned by Walmart but listed on the Mexican stock exchange. It is the country’s most valuable public company, worth some $45bn, and its largest private-sector employer, with a workforce 200,000 strong. Like its parent in Bentonville, Arkansas, it is bracing for a Trumpian makeover of North American commerce. For once, it may be better placed to withstand the disruption.

Last year was rough for Walmex. Together with other Mexican businesses, it had to contend with stubborn inflation, interest rates near record highs and a rising minimum wage. In June a left-wing populist, Claudia Sheinbaum, won the presidency and her Morena party consolidated control of Congress, allowing it to push ahead with plans to emasculate the courts. Five months later Donald “Tariff Man" Trump romped back to power in America, threatening to lob grenades at the global rules-based trading system and maybe actual missiles at drug cartels on Mexican soil. Investors dumped the peso and fled the Mexican bourse, whose main index slumped by 14% in 2024.

In addition to these pan-Mexican problems, Walmex had to steer a swivelling trolleyful of company-specific ones. In contrast to American Walmarts, its outlets count as relatively high-end. This makes them more vulnerable to penny-pinching by Mexicans, who still buy perhaps a third of their groceries from informal tienditas and mercados. On the formal high street it has had to fend off competition from fast-growing rivals such as Tiendas 3B, an Aldi-like discounter which went public a year ago. Online it was being outmatched by e-commerce marketplaces such as Mercado Libre. Sales and operating profit grew more slowly than in previous years. Margins tightened. To top it off, Mexico’s competition regulator was breathing down its neck over its alleged abuse of market power in its dealings with suppliers.

By late November, Walmex’s market value languished at 900bn pesos, down from 1.3trn pesos in January that year. In dollar terms it had collapsed by 40%, from $73bn to $44bn. Even in Mexico’s struggling stockmarket the company looked disappointing. Next to its go-getting parent up north, whose market capitalisation leapt from $450bn to $740bn on the back of perky American GDP growth and Mr Trump’s promise of more of the same, it appeared the underachieving offspring.

As the weaker of the two firms in the feebler of the two economies, Walmex might be expected to suffer more than Walmart now that Tariff Man is putting his duties where his mouth is. On March 4th Mr Trump imposed 25% levies on imports from Mexico and Canada, ostensibly because they were letting fentanyl flood into the United States. He paused most of them two days later, but may change his mind again next month. Even before the latest whiplash, Mexico’s central bank halved its forecast for Mexican GDP growth this year, to 0.6%, given all the uncertainty. That is bad for consumer spending—and so for Walmex’s bottom line.

Yet in several ways Walmex looks less exposed to Mr Trump’s policies than Walmart. Measured by value, just 17% of what Walmex sells in Mexico comes from abroad. Walmart’s equivalent share in America is twice that. In 2022 Walmart imported nearly 1m standard 20-foot containers, more than any other American company, according to the Journal of Commerce, a trade publication. It does not say where these boxes originate. But it is a good guess that many arrive from Mexico (all those avocados and other fresh produce) and similarly tariff-hit China (some of those Zojirushi rice cookers), as well as Canada (for which Mr Trump reserves especial scorn).

Helpfully for Walmex, any retaliatory tariffs Ms Sheinbaum may impose would probably be targeted so as to minimise the harm to Mexico’s wobbly economy. This points to another source of comfort for the company, and Mexican business as a whole—the president herself.

Who’s the piñata?

Yes, she clings to some costly populist pledges, such as raising the minimum wage by 10% or so a year. Still, Mexican CEOs report that she has proved more receptive to their concerns than expected from a protégée of her business-loathing predecessor, Andrés Manuel López Obrador.

Were it not for Mr Trump’s economic vandalism, she might have been less inclined to soften her attitude to the private sector, they say. In a sign that forbearance may be spreading, in December Mexico’s competition cops concluded the investigation into Walmex with a $5m slap on the wrist. At the same time, Mr Trump’s fentanyl finger-wagging is forcing Ms Sheinbaum at last to crack down on organised crime, a perennial corporate bugbear. In late February Mexico extradited 29 alleged kingpins to America. As a Mexican executive sums it up, with a Morena-dominated government, “the only check and balance comes from Trump."

That is not to say todo está bien. Walmex’s share price has stagnated since Mr Trump first announced the tariffs on Mexico at the end of January. But things could be much worse. Just ask investors in Walmart, whose stock has lost 11% of its value.

Subscribers to The Economist can sign up to our Opinion newsletter, which brings together the best of our leaders, columns, guest essays and reader correspondence.