President Claudia Sheinbaum of Mexico called for calm after Donald Trump’s announcement to impose hefty tariffs on Mexican goods, sending the country’s currency tumbling. Trump signed a series of executive orders on his first day in office, including a pledge to slap 25% tariffs on Mexican and Canadian goods, effective as soon as February 1 if the countries don’t take action to curb migration and drugs.
The peso weakened as much as 1.4% before trimming losses to around 0.6%, making it the worst performer in emerging markets. Sheinbaum warned the Trump administration against intervening in Mexico’s territory and pledged support for Mexican citizens who may face deportation. She avoided directly criticizing the proposed tariffs, saying the decree includes preparation for the 2026 review of the North American free trade agreement, known as the USMCA.
Canadian Prime Minister Justin Trudeau also struck a measured tone, saying Trump is trying to weaken the negotiating position of his trading partners by creating uncertainty. The Canadian dollar hit its weakest level in nearly five years following Trump’s remarks, falling as much as 1.4% in Asia trading before recovering most of the losses.
Investors have been trying to forecast how much of Trump’s campaign rhetoric will become policy, while positioning themselves for the impact of tariffs. The peso has lost 18.5% against the greenback last year and now trades at its lowest level since mid-2022.
Sheinbaum has sought to avoid tariffs on all Mexican goods, which could jeopardize nearly $800 billion in annual trade between Mexico and the US and call into question protections of the USMCA agreement. Her government has cracked down on cheap Chinese imports in a bid to appease the new US leader before he took office.
The revival of tariff threats sent a strong signal that Mexico remains particularly vulnerable to Trump, who has a history of using uncertainty as a negotiating tool. Analysts are uncertain about whether Trump will follow through on his pledges to impose the tariffs by the start of next month or other plans that could affect Mexico.