Mexican president fires back at Trump over tariffs

Mexico City — Mexican President Claudia Sheinbaum on Tuesday warned US president-elect Donald Trump of dire economic consequences for both countries from tariffs and suggested possible retaliation after Trump’s threat of across-the-board tariffs of 25% on Mexico and Canada.

“To one tariff will follow another in response and so on, until we put our common businesses at risk,” Sheinbaum said in a letter to Trump, which she read at a press conference and planned to send later in the day. Tariffs would cause inflation and job losses in both countries, she added.

Sheinbaum said she would also seek a call with Trump and send a letter to Canadian Prime Minister Justin Trudeau.

Trump, who takes office on January 20, said late on Monday he would impose a 25% tariff on imports from Canada and Mexico until they clamped down on drugs, particularly fentanyl, and migrants crossing the border.

Mexico is the US’s top trade partner as of September, representing 15.8% of total transactions, followed by Canada at 13.9%. The US is also Mexico’s top trade partner.

“What sense is there” in escalating cross-border tariffs, Sheinbaum added, underscoring they would hit US carmakers with plants in Mexico, such as General Motors and Ford, particularly hard.

Mexico’s automotive industry is the country’s most important manufacturing sector, accounting for more than 35% of manufactured exports by value. The US is by far the dominant destination for vehicles made in Mexico, with as much as 79% of them heading north across the border.

Mexico represents almost 25% of all North American vehicle production.

Tariffs could violate the US-Mexico-Canada Agreement, a trade deal the countries signed in 2020 during Trump’s first administration.

Sheinbaum said her administration had shown Mexico’s willingness to help fight the fentanyl epidemic in the US, that apprehensions of migrants at the border were down, and that migrant caravans were no longer arriving at the US-Mexico border.

However, Sheinbaum noted that criminal groups in Mexico were still receiving guns from the US. She said the region’s shared challenges required co-operation, dialogue and reciprocal understanding.

“We do not produce weapons, we do not consume the synthetic drugs. Unfortunately we have the people who are being killed by crime that is responding to the demand in your country,” she said.

Sheinbaum’s economy minister, Marcelo Ebrard, who was Mexico’s foreign minister for part of Trump’s first term, praised her “firm” response in a social media post.

“Tariffs are a tax and would hurt both countries. We will find a solution,” said Ebrard, who earlier this month warned Mexico could retaliate with its own tariffs on US imports if the incoming Trump administration imposed tariffs on Mexican exports.

Financial analysts reacted to Trump’s announcement with commentaries ranging from pessimism to cynicism.

Analysts at CIBanco said they believed the threat was a negotiation tactic, and as these would also damage the US economy, the final result was likely to be less severe.

The Mexican peso weakened about 2% on Tuesday, aggravating a steep six-month decline.

Capital Economics economist Giulia Bellicoso said tariffs were likely to hit Mexican equities by denting optimism about “nearshoring” — US firms setting up production facilities in Mexico — and curtailing investment.

“We expect Trump to start another trade war,” she said.

Sheinbaum said she was confident Mexico would reach an agreement with Trump but that should the US impose tariffs, Mexico had a plan to shore up its other trade relationships.

“We are not only looking to the north, but also to the south and to the European continent,” she said. “Mexico is strong and we will always come out on top,” she said.

Reuters