President Claudia Sheinbaum called for cool heads to prevail after Donald Trump’s vow to impose hefty tariffs sent the country’s currency tumbling on fears that Mexico will become a target of his administration.
On his first day in the White House, Trump renewed his pledge to slap 25% tariffs on Mexican and Canadian goods, saying he may do so as soon as Feb. 1 if the countries don’t move to clamp down on migration and drugs. He also signed a raft of orders on immigration, declared an emergency on the southern border and pledged to designate Mexican drug cartels as foreign terrorist organizations.
Sheinbaum responded on Tuesday as the aggressive day-one moves from Washington caused the peso to weaken as much as 1.4%. It later trimmed losses to around 0.6%, still by far the worst performer in emerging markets.
She warned the Trump administration against interventions in her nation’s territory and pledged support for Mexican citizens who may face deportation. Sheinbaum avoided a direct rebuke of the proposed tariffs, saying only that the decree Trump signed includes preparation for the 2026 review of the North American free trade agreement known as the USMCA.
“It’s important to always keep a cool head and refer to the signed orders beyond the actual rhetoric,” she said at her daily morning news conference. “That’s what counts before the law, strictly speaking.”
Canada Prime Minister Justin Trudeau struck a similar note, saying that Trump is trying to weaken the negotiating position of his trading partners by creating uncertainty. The Canadian dollar hit its weakest level in nearly five years following Trump’s remarks, falling as much as 1.4% in Asia trading before recovering most of the losses.
“We know that there is always going to be a certain amount of unpredictability and rhetoric coming out from this administration,” Trudeau told reporters, adding that Canada doesn’t want a tariff war but is ready to retaliate if necessary.
Investors have for months attempted to forecast how much of Trump’s campaign rhetoric would become policy, while trying to position themselves for the impact of tariffs. The peso, one of the most heavily-traded emerging-market currencies, lost 18.5% against the greenback last year, and now trades around the lowest level since mid-2022 at 20.6 per dollar.
Sheinbaum has sought to avoid tariffs on all Mexican goods, which could jeopardize nearly $800 billion in annual trade between Mexico and the US and call into question protections of the USMCA agreement, which Trump signed in 2020.
Her government has cracked down on cheap Chinese imports in a bid to appease the new US leader before he took office. But the revival of tariff threats sent a strong signal that Mexico remains particularly vulnerable to Trump, who held off on new China-specific trade levies on Monday.
“It’s a lot easier for the Trump administration to pick on Mexico than China,” said Jack McIntyre, a money manager at Brandywine Global Investment Management. “It’s part of Trump’s love for weaponizing uncertainty.”
Trump has also said previously that he is considering asking for a renegotiation of the USMCA. Still, there is deep uncertainty among analysts about whether he will follow through on pledges to impose the tariffs by the start of next month or other plans that could affect Mexico.
“Right now it’s a little speculative as to what is actually going to happen,” said Greg Lesko, a money manager with Deltec Asset Management in New York. “I would lean toward the view that there’s no serious damage here and that the weakness is short-lived as likely the 25% is a negotiating position.”
Sheinbaum, who has spoken with Trump twice by phone and pledged to seek strong relations with him, reiterated Tuesday that the Mexican government wanted to avoid a direct confrontation with the US. She added that she was waiting for Foreign Affairs Minister Juan Ramon de la Fuente and US Secretary of State Marco Rubio to begin formal talks between the two nations.
Migration and Cartels
Sheinbaum downplayed Trump’s migration orders, saying the text of the decree is similar to the actions he took during his first term as president.
Mexico will act in a humanitarian manner but also seek to repatriate foreigners to their countries of origin if the US removes them, she said. “Remain in Mexico,” the program Trump’s government said it would reinstate, required migrants to wait for their US immigration court cases in Mexican territory.
Mexico also outlined its strategy for the deportation of its own citizens from the US, with Interior Minister Rosa Icela Rodriguez stating that it would provide hundreds of buses to transport them from the border to Mexican help centers and their states of origin. De la Fuente emphasized a series of options for those detained, including an app with a panic button and access to support at consulates in the US.
Source : https://www.yahoo.com/news/mexico-must-keep-cool-head-141019594.html