(Bloomberg) -- The Mexican peso tumbled after President Donald Trump vowed to impose stiff tariffs, reigniting fears among traders that the nation will become a target over the next four years.
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The currency weakened as much as 1.4% before trimming losses. The selloff, the worst in emerging markets, came a day after Trump said he would slap tariffs of as much as 25% on Mexico and Canada unless the US neighbors did more to clamp down on immigration.
“It’s a lot easier for the Trump administration to pick on Mexico than China,” said Jack McIntyre, a money manager at Brandywine Global Investment Management. “It’s part of Trump’s love for weaponizing uncertainty.”
Investors have for months been trying to forecast how much of Trump’s rhetoric would become policy, while trying to position themselves for the impact of tariffs. The peso, one of the most heavily traded emerging-market currencies, lost 18.5% against the greenback last year, and now trades around the lowest level since mid-2022 at 20.7 per dollar.
Still, there’s plenty of uncertainty on whether Trump will follow through with his pledge to impose the tariffs, as he promised, by Feb. 1.
“Right now it’s a little speculative as to what is actually going to happen,” said Greg Lesko, a money manager with Deltec Asset Management in New York. “I would lean toward the view that there’s no serious damage here and that the weakness is short lived as likely the 25% is a negotiating position.”
--With assistance from Vinícius Andrade.
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