Mexican Peso Plummets as Trump’s Tariff Threat Looms

The Mexican peso took a sharp dive on Tuesday morning. The local currency fell over 1% after newly inaugurated U.S. President Donald Trump announced concrete plans for his tariff policy.

Trump threatened to impose a 25% tariff on imports from Mexico and Canada starting February 1st. The spot exchange rate reached 20.7510 pesos per dollar.

Compared to Monday’s official close of 20.5180 units, as reported by the Bank of Mexico (Banxico), this change represents a drop of 23.30 cents or 1.14 percent for the peso.

The dollar price fluctuated between a high of 20.8022 units and a low of 20.4803 units. The peso had appreciated on Monday after Trump’s inauguration speech lacked specific details about his tariff program.

However, after the session closed, Trump declared that Mexican and Canadian products would face tariffs, causing the exchange rate to rise. Michael Pfister, a Commerzbank analyst, noted the market’s surprise at Mexico and Canada being exceptions to the tariff delay.

The peso has weakened since Trump’s electoral victory in November. Investors worry that tariffs will harm the economy of the United States’ largest trading partner. Official data shows that 86% of Mexico’s products are destined for the U.S. market.

Mario Aguilar, a senior portfolio strategist at Janus Henderson, warned that Latin American companies relying on this trade could face difficulties if Trump pushes for more U.S.-made goods consumption.

Mexican Stock Market Resilience

Meanwhile, Mexican stock markets showed resilience. The S&P/BMV IPC index of the Mexican Stock Exchange (BMV) rose 0.51% to 50,459.37 units. The FTSE BIVA index of the Institutional Stock Exchange (Biva) increased by 0.50% to 1,023.49 units.

These gains occurred despite Trump’s tariff threats, supported by rises in their New York counterparts after a U.S. holiday. Within the benchmark index, most stocks traded higher. Alfa, an industrial company, led the gains with a 4.41% increase to 15.87 pesos.

Grupo Carso followed with a 3.91% rise to 121.39 pesos, and Megacable climbed 3.58% to 37.90 pesos. U.S. stock markets also rose, driven by positive expectations for the beginning of Donald Trump’s second term.

The peso’s volatility and the stock market’s resilience highlight the complex economic landscape facing Mexico. As the country navigates these challenges, businesses and investors remain cautious yet optimistic about future prospects.