U.S. Tariffs Hit the Mexican Peso and Escalate Trade TensionsThe recent imposition of 25% tariffs by the United States against Mexico has generated significant pressure on the Mexican peso, which today has reached levels above 20.8 per dollar, marking yet another notable depreciation in 2025. This up to 1.5% increase at its daily high in the exchange rate reflects the uncertainty surrounding Mexico’s economic and trade outlook, especially considering that more than 80% of Mexican exports go to the United States. As the market has reiterated multiple times, a deterioration in trade relations between the two countries could result in serious consequences for Mexico’s economic development and financial stability.
The immediate trigger of this volatility has been the implementation of punitive measures, which had been postponed after negotiations in which both Mexico and Canada agreed to address the issues of illegal migration and drug trafficking, though not to the extent that the White House deemed necessary. While Canada has already responded with tariffs on U.S. goods valued at $107 billion, President Claudia Sheinbaum has called a press conference to announce Mexico’s response to this situation. She is expected to unveil retaliatory measures this weekend, which, according to some analysts, could include tariffs on strategic U.S. products. This factor has kept investors and business leaders on edge, awaiting concrete definitions of the Mexican government’s course of action.
While market sentiment had remained relatively stable until now, statements from U.S. President Donald Trump, declaring that “there was no room” for further negotiations, and the fact that the tariffs are directly linked to the fight against fentanyl, have created a cautious atmosphere. In addition, recent economic data—such as the eighth consecutive month of contraction in the manufacturing sector and the decline in business confidence in February—further complicate the outlook. This reinforces expectations that the Bank of Mexico will continue its monetary normalization process, which began in 2025 at a more aggressive pace with a 50-basis-point normalization.
In this context, it is crucial to observe how the Mexican government responds to what many see as an escalation of the trade war. Personally, I believe the key will be balancing the need to protect the national economy with the urgency of avoiding an even greater confrontation.
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