Mexico pledges tariffs on US while calling for cooperation

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Mexico’s President Claudia Sheinbaum said she instructed the economy minister to kick off a response plan that includes retaliatory tariffs against US President Donald Trump’s promised 25 per cent levies. 

Sheinbaum said the country would also implement non-tariff measures, while calling for cooperation with the US on topics including security, migration and addressing the fentanyl public health crisis, according to a post on X Saturday night. 

“It is not by imposing tariffs that problems are solved, but by talking and dialogue, as we have done in recent weeks with your State Department to address the phenomenon of migration,” Sheinbaum said to Trump in the post.

The Mexican president asked Economy Minister Marcelo Ebrard to “implement the Plan B” her administration has been working on to deal with trade levies. The plan “includes tariff and non-tariff measures in defense of Mexico’s interests,” she added, without offering details on the scope.

Trump signed orders for tariffs of 25 per cent on Mexico and Canada and 10 per cent on China, according to White House officials. The tariffs take effect at 12:01 a.m. on Tuesday, and it’s unclear if that offers a last-chance window for the biggest US trade partners to negotiate.  

“Why not implement tariffs as of now, or tomorrow, or Monday? Why Tuesday?,” said Gabriel Casillas, chief Latin America economist at Barclays Plc. “It seems that US president Trump wants something in return before tariffs are effectively imposed.”

Sheinbaum rejected the Trump administration’s accusations that her government has ties to criminal cartels that traffic drugs into the US. The Mexican president, noting that her country cooperates extensively to stop drug trafficking — seizing 40 tons of drugs in four months — suggested Trump take care of street drug sales and the fentanyl consumption crisis in the US.

She said that drug consumption and distribution is a public health problem that the US government has not addressed. She offered to Trump that the two countries create a working group to deal with security and health. 

“If the US wants to fight the criminal groups that traffic drugs and generate violence, we must work together in a comprehensive manner,” Sheinbaum said. “Mexico doesn’t want confrontation.”

No Confrontation

Trump’s orders include retaliation clauses that would increase US tariffs if the countries respond in kind, as Mexico and Canada have pledged to do. The new measures will be on top of existing trade levies on those countries. Sheinbaum and Canadian Prime Minister Justin Trudeau are expected to speak on Saturday night.

Trump has threatened to impose tariffs on Mexico and Canada, the largest US trading partners, since his presidential campaign. He has said the levies could have been avoided if those countries helped reduce the crossing of undocumented migrants and drug trafficking into the US. Sheinbaum and Trudeau have shown their governments’ efforts to solve both issues in an attempt to satisfy Trump’s wishes.

Trump’s decision affects the US-Mexico-Canada free trade agreement, or USMCA, that he promoted during his first administration. Sheinbaum said on Friday that the tariffs would “set aside” the trade pact and raise the prices of cars, refrigerators, computers, fruits and beer in the US. 

  • Also read: Trump imposes 25% tariffs on Canada and Mexico, 10% on China

“Mexico will take its own actions but it’s not an even playing field. And the actions that Mexico will have to impose so that there’s an effect on the US will also be hard for Mexico, for example, a tax on yellow corn” said Valeria Moy, director of the Mexican Institute for Competitiveness, a think tank based in Mexico City.

The Mexican economy could enter a “severe recession” if Trump’s tariffs remain in place for more than a quarter, according to Gabriela Siller, director of economic analysis at Grupo Financiero Base. “If the tariffs last several months, the Mexican peso depreciation could reach record highs.” Also, US tariffs could freeze new foreign direct investment in Mexico, she added.

The peso was battered this week, losing 2 per cent against the greenback amid speculation the tariff would be announced Saturday.

According to Barclays analysts, a 25 per cent quasi-permanent tariff on Mexican goods would see the peso weaken to 24.5 per dollar, a level last seen at the height of the pandemic shock in 2020.

One of the possible impacts of the executive orders may be that US companies look for providers in other countries, said Alfonso de los Rios, CEO of Mexican logistics company Nowports, which helps companies move cargo internationally by air, ocean or on the ground.

“I don’t think we will get to the point where the US stops depending of Mexico as a trade ally,” he said. “But companies will definitely move to depend less on Mexico imports.” 

More stories like this are available on bloomberg.com



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