The switch of the Trump administration to impose charges for Mexico despatched shock waves throughout the nation of 130 million individuals on Sunday, with the financial sector after the impression sector.
Thus far, Mexico has not but supplied any specifics of the way it plans to retreat. However President Claudia Shainbaum’s negotiators should select from areas the place her nation has a nicely -known reacting lever, equivalent to agriculture, and elements of the economic system the place it has little or none, such because the power business.
“Simply as a place to begin, Mexico should avenge,” says Kenneth Smith Ramos, a former Mexican authorities negotiator who compiled the 2018 revenge listing when the nation gave up the Trump’s first administration due to the tariffs.
“However it’s important to do it in a manner that causes financial harm to the US, with exact photos of sure merchandise that additionally trigger political turbulence,” added Smith Ramos.
This will likely imply new tariffs for Kentucky Bourbon, excessive fructose corn syrup, pork or different merchandise coming primarily from nations that supported President Trump within the November elections.
The situations have modified because the final time Mexico and the US had been sunk in a industrial disaster throughout the first time period of the Trump. Since then, Mexico has obscured China as the biggest buying and selling companion in items with the US. Mexico can be rising as Top market Globally for meals and agriculture exports to the US, this imports elevated by 7 % in comparison with the earlier 12 months to over $ 29 billion, based on the US Ministry of Agriculture.
But when agriculture is an space the place Mexico can discover some ways of revenge, different elements of the economic system, equivalent to automotive or power manufacturing, expose the deep vulnerabilities of Mr Trump’s heavy techniques.
In these sectors, the studying of Mexico from the US has really elevated lately, giving its negotiators a fewer maneuvering room. However G -N Trump’s tariffs might nonetheless resonate in the US in the event that they result in larger costs for automobiles or beautiful fuels equivalent to diesel.
Mexico additionally has another instruments.
Authorities might permit the nation’s foreign money, the peso, weaken towards the greenback by successfully making exports extra aggressive, regardless of the tariffs of Gn Trump. The peso fell 2.5 % in Sunday commerce to 21.21 to the greenback, its lowest stage after Russia’s invasion of Ukraine shakes the markets in 2022.
17 -percent slider of the Pesoto worth within the final 12 months, mixed with the tariffs imposed on Canada and China, amongst Mexico’s fundamental opponents on the US market, will ease the impression of the charges in Mexico, mentioned Alberto Ramos, head of the chief of The chief Latin America Analysis Crew at Goldman Sachs.
However the true danger to Mexico’s economic system is whether or not the commerce battle will probably be resolved rapidly or extends for a protracted time frame. If the stress stays unresolved, it may possibly result in manufacturing unit closure, job loss and recession, economists warn.
Raine Mahdi, CEO of Zipfox, based mostly in a San Diego firm that connects factories in Mexico with US corporations searching for options from Asia, mentioned it views the Tariffs as a techniques for negotiation geared toward profitable Mexico reductions in areas equivalent to migration areas and drug commerce.
“Every part that Mexico actually has to do, and they’re going to present some actual trustworthy efforts in these areas,” mentioned G -n Mahdi. “That is all that.”
Nonetheless, coverage might be intervene with the conclusion of a deal. Trump Administration claim The truth that the Mexico authorities has an “impatient union” with drug cartels has already hit a nerve on the political establishment of Mexico, making a strict germination from G -Jia Shainbaum.
In video In response to US tariffs, the Mexican president on Sunday referred to as G -N Trump’s declare that the Mexican authorities had an alliance with felony teams “terribly irresponsible”. She mentioned she was getting ready to declare on ignition measures on Monday morning.
“In the event that they wish to act, they don’t have to direct their eyes to Mexico, however to their very own nation, the place they did nothing to cease the unlawful sale of this and different medicine,” mentioned Gja Shinbaum, referring to Fentanyl.
Whereas the stress is simmering, these are the areas of the Financial system of Mexico, which can form the response on the aspect of the tariffs of G -N Trump.
Mexican farmers, who provide 63 % of the imports of greens to the US and 47 % of the imports of fruit and nuts, might fall beneath intense strain if the tariff dispute intensified. Merchandise like Avocados, who’ve skilled a fast demand from US customers, are prone to grow to be costlier.
However as Mexico elevated its exports to agriculture to the US, it additionally turned a very powerful marketplace for US meals and agricultural exports earlier than Canada and China.
This might permit Mexico to focus on sure merchandise from the US with tariffs. In 2018, Mexican negotiating strategically put charges for merchandise from nations and areas with robust ties with the primary Trump administration, together with apples, bourbon, cheese, cranberries, pork and potatoes.
Canada, which dn Trump additionally hit 25 % of tariffs, has already introduced retaliatory taxes on chosen American items this time. The country’s response is focused on maximum increase The impact in Republican -controlled nations, in an try and make representatives from these nations ask the president to cancel US tariffs and de -escape.
This tactic, together with related tariffs for American merchandise from Canada, appears to be working when staff of Mexico, Canada and the US returned to the negotiation desk. By tearing the tariffs imposed at the moment, they renegotiate the commerce contract, intertwining the three nations and discarded the US and Mexico-Canada settlement, which Mr. Trump signed in 2020.
The destiny of this contract, generally known as USMCA, is now within the air, as G -H Trump and its advisers declare that its situations weren’t restrictive sufficient to stop US producers from transferring factories outdoors the US.
As for agriculture, consultants say Mexico might also have the potential to rotate, albeit slowly, in different markets. Even when Mexico depends on the US, Mexico is more and more striving to broaden commerce with nations in Asia and Latin America.
Mexico additionally strengthened the hyperlinks with the European Union that’s second largest market for Mexican exports After the US and imports merchandise equivalent to tequila and beer, espresso, fruit juice, avocado and berries.
Along with tariffs, Mexico can eradicate preferences for imported grains and vegetable oils from the US, probably selecting to import such merchandise from Latin American agricultural crops equivalent to Brazil or Argentina. However it might require main adjustments in infrastructure equivalent to ports and railways, one thing tough to do within the close to future.
Automobiles
The brand new tariffs have the potential to trigger a defeat within the automotive business in Mexico, a Lynch of the nation’s economic system, which employs multiple million individuals and symbolize about 5 % of gross home product.
Autos and automotive elements are the biggest exports in Mexico to the US price $ 157 billion in 2023. As automobile manufacturing has decreased over time in Canada, it has elevated in Mexico, exposing producers from throughout automotive producers The world and their many hundreds of Mexican staff, to interruptions.
About 27 % of Nissan’s gross sales in the US had been obtained from Mexico in 2024 whereas Stellantis obtained 23 % and Basic Motors acquired 22 %, based on a report by S&P World, monetary info supplier and credit score scores.
As the provision chains are more and more rising and extra intertwined, evidently Mexico has a comparatively little leverage to reply with measures geared toward US automotive producers, as many of those corporations are already working in Mexico and preventing With find out how to react.
However Mexico might present a reduction by making extra to restrict the import of Chinese language autos that rapidly make an vital marketplace for US and European automotive producers.
Uncertainty about one of many fundamental engines of Mexico’s economic system can result in closing factories and job loss at house. And in the US, autos tariffs can put extra voltage to autos’ accessibility when autos are approaching historic maximums.
For US customers, the 25 % import tax will add $ 6,250 to the typical price of $ 25,000 (which incorporates the value of a automobile, transport and duties) of a automobile from Mexico, calculated S&P.
Vitality
One other weak spot for Mexico is power. After a fossil fuel And years of insufficiency in its personal power manufacturing, Mexico is confronted with each the discount of oil manufacturing and the scarcity of renewable power assets to strengthen its community.
Placing this dilemma, Mexico relies on the import of US pure fuel for staggering 70 % of its house consumption of pure fuel.
The quick -growing industrial base within the nation is especially depending on this power import into electrical energy factories, warehouses and information facilities. This reliability might forestall Mexico from placing by itself tariffs on imported American power.
Mexico additionally exports roughly 700,000 barrels of uncooked oil a day in the US, masses that can now face a 25 % import tax. (In distinction, solely 10 % tariffs will probably be positioned on Canadian power exports to the US.)
Mexico, in flip, additionally imports massive portions of refined fuels equivalent to gasoline and diesel from the US. The predecessor of Gja Shainbaum, Andres Manuel Lopez Obrador, tried to restrict this habit, constructing enormous new refineries in Mexico.
However the enormous exceeding prices and delays retained Pemex, Mexico’s Nationwide Petroleum Firm, from lowering this dependence on the import of gasoline from the US. This leaves Mexico with much less leverage as he prepares to answer the measures of the Trump administration.
Ani Correal Contributed to Mexico Metropolis reporting.
