Mexico Pledges Tariffs on US While Calling for Cooperation
Alex Vasquez
4 min read
(Bloomberg) -- Mexico’s President Claudia Sheinbaum is readying counter-tariffs against the US after President Donald Trump promised 25% levies that could send her nation’s economy into a recession.
The Mexican president said in a post on X Saturday night that she instructed Economy Minister Marcelo Ebrard to “implement the Plan B” her administration has been working on to deal with Trump’s long-promised tariffs. The plan includes non-tariff measures, she added, without offering details on which products will be affected.
Still, Sheinbaum insisted that cooperation on security, migration and the fentanyl crisis — all focuses of Trump’s presidential campaign — would be the best path forward.
“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. Her administration has made a point of cooperating with deportation efforts in part by readying dozens of shelters at the border.
Her messaging was similar to that of Canada Prime Minister Justin Trudeau, whose nation is facing 25% tariffs on nearly everything, and 10% on energy. All the levies — along with 10% on China — take effect at 12:01 a.m. on Tuesday, according to White House officials.
It’s unclear if there’s still a window for negotiation with Trump.
“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 also added that Mexico cooperates extensively to stop drug trafficking, seizing 40 tons of drugs in four months. She instead suggested Trump take care of street drug sales and the fentanyl public health crisis. She also rejected his administration’s accusations that her government has ties to drug-trafficking criminal organizations — which Trump also said he plans to designate as terrorist groups.
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.”
Economic Disaster
Trump’s tariffs represent a significant risk to Mexico, which sends more than 80% of its exports to the US, its main commercial partner with nearly $800 billion in trade per year.
Felipe Hernandez, Bloomberg’s Latin America economist, estimated in late January that Trump’s tariffs could put 16% of Mexico’s gross domestic product at risk and drop total exports of goods and services by as much as 30%.
Tariffs could also undermine foreign direct investment in Mexico, which reached $36 billion in 2023, and cause numerous foreign companies, especially in the automotive industry, to move their production to the US, which could affect thousands of jobs in Mexico.
A reduction in investment and job losses could fuel the economic slowdown Mexico is facing, while the retaliatory levies Sheinbaum promised could raise prices of several imported goods, boosting inflation.
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.”
The peso was battered this week, losing 2% against the greenback amid speculation the tariff would be announced Saturday.
According to Barclays analysts, a 25% 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.
Pricier Goods
Sheinbaum said on Friday that the tariffs would “set aside” the US-Mexico-Canada free trade agreement, or USMCA, and raise the prices of cars, refrigerators, computers, fruits and beer in the US.
Trump’s orders also include retaliation clauses that would increase US tariffs if the countries respond in kind, as Mexico and Canada have pledged to do.
“Mexico will take its own actions but it’s not an even playing field,” said Valeria Moy, director of the Mexican Institute for Competitiveness, a think tank based in Mexico City. “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.”
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 on Mexico as a trade ally,” he said. “But companies will definitely move to depend less on Mexico imports.”
--With assistance from Michael O'Boyle, Maya Averbuch, Maria Elena Vizcaino and Valentine Hilaire.
(Updates with Sheinbaum’s reaction, analyst comments and background throughout.)
