Anamika Dey, editor
Brief news
- Mexican President Claudia Sheinbaum warned of retaliatory tariffs if U.S. President-elect Trump implements a proposed 25% tariff, which could lead to significant job losses and price increases in the U.S.
- Economy Minister Marcelo Ebrard criticized the tariffs as harmful to both U.S. and Mexican economies, particularly affecting the automotive sector and increasing vehicle prices.
- Analysts view Trump’s tariff threats as negotiation tactics rather than genuine trade policy, with potential long-term impacts on U.S.-Mexico relations and the USMCA agreement.
Detailed news
On Wednesday, Mexican President Claudia Sheinbaum declared that Mexico would respond if U.S. President-elect Donald Trump implemented his proposed 25% across-the-board tariff. Her government has expressed concern that this action could result in the loss of 400,000 U.S. jobs and an increase in prices for U.S. consumers.
During a press conference, Sheinbaum made the clearest statement yet that the country was preparing potential retaliatory trade measures against its top trade partner, stating that Mexico would also raise tariffs if there are U.S. tariffs.
Speaking alongside Sheinbaum, Mexican Economy Minister Marcelo Ebrard advocated for increased regional cooperation and integration as opposed to a conflict of retaliatory import taxes.
Ebrard characterized Trump’s proposed tariffs as “a shot in the foot,” as they appear to contravene the USMCA trade agreement between the United States, Canada, and Mexico.
Ebrard cautioned that the tariffs would result in substantial employment losses in the United States, reduced growth, and negatively impact U.S. companies that manufacture in Mexico by effectively doubling the taxes they had to pay. “The effect on businesses is substantial,” he stated.
Ebrard further stated that the proposed tariffs would have a particularly detrimental impact on the automotive sector’s leading cross-border exporters, including Ford, General Motors, and Stellantis.
Ebrard observed that the price of pickup trucks distributed in the United States would increase due to the fact that 88% of them are manufactured in Mexico. The popularity of these vehicles is particularly high in rural regions that overwhelmingly voted for Trump. “We anticipate that the average price of these vehicles will rise by $3,000,” stated Ebrard.
Sheinbaum and Trump conversed via telephone later on Wednesday, during which time they deliberated on matters that were at the forefront of Trump’s agenda.
The tariffs were to remain in effect until the flow of narcotics, particularly fentanyl, and migrants into the United States was under control, as stated by Trump.
Trump stated in a post on his Truth Social platform that Sheinbaum “agreed to halt migration through Mexico and into the United States, thereby effectively closing our Southern Border.” He characterized the discussion as “extremely beneficial.”
Sheinbaum subsequently stated on X that she had presented Mexico’s migration strategy to Trump during her call, which involved “attending to” migrants prior to their arrival at the U.S.-Mexico border.
She further stated, “Mexico’s policy is not to establish barriers between governments and their populations, but rather to establish connections between them.”
Mexico’s peso strengthened by nearly 1% against the dollar in after-hours trading on Wednesday, reversing losses that had been recorded in previous days.
Numerous analysts consider Trump’s tariff threats to be more of a negotiation strategy than a trade policy.
“The absence of a clear connection between this threat and trade-related inquiries implies that the new president intends to employ tariffs as a negotiating tactic to achieve objectives that are largely unrelated to trade,” stated David Kohl, chief economist at Julius Baer.
Loss of profitability
The automotive industry of Mexico is the most significant manufacturing sector in the country, with a significant portion of its output being exported to the United States. It accounts for roughly 25% of the total vehicle production in North America.
Analysts at Barclays have predicted that the proposed tariffs could “effectively eliminate all profits” from the Detroit Three automakers.
In a note published on Tuesday, they stated, “Investors underestimate the potential disruption that a blanket 25% tariff on any vehicles or content from Mexico or Canada could cause.”
According to Brian Hughes, a spokesperson for Trump’s transition team, the tariffs would safeguard U.S. manufacturers and workers from “unfair practices of foreign companies and foreign markets.”.
According to Hughes, Trump would implement policies that would increase the prosperity and affordability of life in his country.
Stellantis and General Motors declined to provide commentary. Ford did not provide any commentary regarding the potential impact of the tariffs on its operations; however, it noted that it produces a greater number of vehicles in the United States than the majority of other major automakers.
AMIA, the automotive industry association of Mexico, stated that it would be prepared for any eventuality and would await the implementation of formal measures.
The Institute of International Finance, a trade organization for the global financial services sector, cautioned that Mexico-U.S. relations would be difficult in the future.
“The region could be significantly impacted by the imposition of tariffs, which could ultimately result in increased protectionism, as well as other policies that affect exchange rates and commodity prices,” it stated in a note.
The USMCA is scheduled for review in 2026.
Katia Goya, the director of international economics at Grupo Financiero Banorte, predicted that the three USMCA countries would likely pursue a comprehensive renegotiation of the treaty rather than merely approving its continuation in its current form.
“The United States will experience lower economic growth, higher unemployment, and higher inflation as a result of a trade-conflict situation,” Goya stated.
In the first nine months of this year, Ebrard reported that USMCA trade totaled $1.78 trillion.
Ebrard stated, “We have the ability to fragment and divide through tariffs.” “Mexico’s objective is to establish a more resilient region, rather than to engage in conflicts and divisions.”
Source : CNBC news
