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Donald Trump said he would impose 25% tariffs on Mexican imports on his first day in the White House.
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The Mexican president said her country would retaliate, which she said would impact joint ventures.
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In the first quarter of 2024, the US accounted for 82.7% of Mexican exports.
Mexican President Claudia Sheinbaum Pardo said her country would go after the U.S. with tariffs of its own if newly elected President Donald Trump went ahead with new tariffs on goods from the country, which would hurt joint venture partnerships.
On Monday, Trump took to his Truth Social platform to announce that he would be signing an executive order on his country first day back at the office to impose a 25% tariff on all goods from Mexico and Canada, and an additional 10% tariff on imports from China.
He said the tariffs “would remain in effect until drugs, especially Fentanyl, and all illegal aliens stop this invasion of our country!”
At a press conference on Tuesday, Sheinbaum said that “one tariff will be followed by another, and so on, until we endanger joint ventures.”
She pointed to General Motors, Stellantis and Ford Motor Company as Mexico’s top exporters to the U.S. and as companies that could be at risk from tariffs.
“Why should we burden and endanger them?” Sheinbaum said, adding that tariffs would “cause inflation and job losses in the U.S. and Mexico.”
About 76% of vehicles produced in Mexico are exported to the US.
On Tuesday, the Mexican peso reached its lowest level against the dollar since March 2022, falling more than 2% in one day.
Gabriela Siller, director of economic analysis at the financial group Banco Base, said Trump may have made the tariff threat in a similarly clumsy manner as in the past.
“But Mexico’s response, that we’re going to respond to you with tariffs, is going to make Trump actually impose them,” she told the Associated Press.
Mexico is the world’s largest exporter to the US and its economy is heavily dependent on its northern neighbor.
In the first quarter of 2024, the US accounted for 82.7% of Mexican exports, and trade between the two countries is expected to increase by 300% over the next decade.
As a result, Mexico’s “ability to walk away from President-elect Trump’s threats remains limited,” Wendy Cutler, vice president at the Asia Society Policy Institute and a former US trade official, told AFP.
The past as a guideline
During Trump’s first presidency, the US imposed 25% tariffs on steel and 10% on aluminum imports from Mexico before lifting them in 2019.
In 2019, the Trump administration also threatened to impose tariffs of up to 25% on all goods coming from Mexico, saying these would remain in place until Mexico “substantially” addresses the “illegal” influx of migrants coming through its territory would stop.
Mexico retaliated by imposing tariffs ranging from 7% to 25% on an estimated $3 billion worth of U.S. goods, including steel, pork, fresh cheese and apples.
Derek Scissors, a senior fellow at the American Business InstituteA think tank warned on Monday that attacking Mexico on top of China would “greatly increase” inflation risks.
While Trump promised to impose tough tariffs during his presidential campaign, his first term suggests that the sweeping threats – which have resonated across global markets and in vulnerable sectors such as the auto industry – could be a version of his long-held ‘ leverage’, as BI previously reported.
Scott Bessent, Trump’s pick for Treasury Secretary, calls tariffs a “negotiating tool.”
Meanwhile, President Sheinbaum said that “dialogue is the best path to achieving understanding, peace and prosperity for our two countries.”
She added: “I hope our teams can meet soon.”
Read the original article on Business Insider
