Mexico’s president warns Trump’s tariffs will kill jobs, shows retaliation Reuters

By Sarah Morland and Brendan O’Boyle

MEXICO CITY (Reuters) – Mexican President Claudia Sheinbaum on Tuesday warned U.S. President-elect Donald Trump of the negative economic consequences for both countries of tax revenue and suggested possible retaliation following his threat of a 25% overall tariff on Mexico and Canada.

“One tariff will follow another in response and so on, until we put our normal businesses at risk,” Sheinbaum said in a letter to Trump, which he read aloud at a press conference, warning that the tariffs would cause inflation and job losses in both. countries.

Sheinbaum added that he would also seek a phone call with Trump and send a letter to Canadian Prime Minister Justin Trudeau.

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

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

“What’s the point?” on the increase in cross-border tariffs, Sheinbaum added, stressing that they would hit American automakers with plants in Mexico, such as General Motors (NYSE: ) and Ford (NYSE: ).

Mexico’s automotive industry is the country’s most important manufacturing sector, accounting for more than 35% of manufactured goods exported by value. The United States is the leading destination for cars made in Mexico, with up to 79% of them going north across the border.

Mexico represents about 25% of all products produced in North America.

The tariffs could violate the United States-Mexico-Canada Agreement, a trade agreement the countries signed in 2020 during the first Trump administration.

Sheinbaum said his administration has shown Mexico’s willingness to help fight the fentanyl epidemic in the US, that the fear of migrants at the border has ended, and that migrant caravans are no longer arriving at the US-Mexico border.

However, Sheinbaum noted that criminal groups in Mexico were still receiving firearms from the US

“We do not produce weapons, we do not consume synthetic drugs. “Unfortunately, what we have are people who are killed by crimes that are in line with the need in your country,” he said.

“Tariffs are taxes and they can hurt both countries. We will find a solution,” said Mexico’s Economy Minister, Marcelo Ebrard, who earlier this month warned Mexico that it could retaliate with tariffs on US imports if the incoming Trump administration imposes tariffs on Mexican exports. .

His deputy, Luis Rosendo Gutierrez, said Trump’s tax threats are consistent with the behavior of the president-elect in his first term.

“It’s his way of doing things,” Gutierrez said in an interview with Radio Formula. “First, he takes a strong position, but then he sits down to negotiate. If he just wanted to raise (costs), he would have done it on (Jan.) 20, he wouldn’t have informed us in advance.”

Financial analysts, on the other hand, reacted to Trump’s announcement with comments ranging from pessimism to criticism.

At CIBanco, analysts say they believe the threat is a ploy to force Mexico, Canada and China to negotiate, and since these measures will hurt the US economy, the final result may not be too great.

The Mexican peso weakened nearly 2% on Tuesday, extending its biggest decline in six months.

Capital Economics economist Giulia Bellicoso said the prices could hit Mexican stocks by expressing optimism about the move closer – a trend for multinational firms to set up production facilities in Mexico – and reduce investment.

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

Sheinbaum said he hopes that Mexico will reach an agreement with Trump but if the US imposes tariffs, Mexico has a plan to strengthen its trade relations.

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