Mexican Peso Falls Amid Trump’s 25% Tariff Threats on Steel and Aluminum

The Mexican peso weakened against the US dollar on Monday as investors reacted to new tariff threats from former US President Donald Trump.

Trump announced plans to impose a 25% tariff on all steel and aluminum imports, including those from Mexico and Canada, sparking concerns in financial markets.

The peso traded at 20.6343 per dollar in the spot market, reflecting a 0.44% decline from Friday’s close of 20.5450, according to official data from Banco de México (Banxico). This depreciation equates to a loss of 8.93 centavos for the local currency.

The dollar’s price fluctuated between a high of 20.6403 and a low of 20.5517 during the session. Meanwhile, the US Dollar Index (DXY), which measures the greenback against six major currencies, rose 0.22% to 108.28.

Banco Base attributed the peso‘s depreciation to the dollar’s strength following Trump’s latest tariff announcement. Experts highlighted that Mexico could face significant economic repercussions.

This is because 82% of its steel, aluminum, and related products are exported to the United States. Analysts at CiBanco predict the peso will trade within a range of 20.30 to 20.80 per dollar this week.

Market Uncertainty Mounts

Adding to market uncertainty, investors are closely monitoring key US inflation data. They are also paying attention to Federal Reserve Chair Jerome Powell’s testimony before Congress this week. Powell’s remarks could shape inflation expectations and influence future monetary policy decisions.

On the domestic front, Banxico Governor Victoria Rodríguez Ceja noted in an interview with Reuters that Mexico’s inflationary environment might allow further reductions in the benchmark interest rate.

Last week, Banxico cut its key rate by 50 basis points to 9.5%. This move doubled its usual adjustments of 25 basis points since it began lowering borrowing costs from a record high of 11.25% in March 2024.

The peso’s performance underscores its vulnerability to external shocks like trade policy changes and global monetary trends. As Mexico navigates these challenges, its economic dependence on US trade remains a critical factor shaping its financial stability.