Donald Trump said he’d put in place 25% tariffs on Mexican imports on his first day back in the White House.
Mexico’s president said her country would retaliate, which she said would impact joint ventures.
In the first quarter of 2024, the US accounted for 82.7% of Mexico’s exports.
President Claudia Sheinbaum Pardo of Mexico said that her country would fight back against the US with tariffs if President-elect Donald Trump went ahead with new tariffs on goods from Mexico. This is because joint venture partnerships would be hurt by the tariffs.
Trump said on his Truth Social platform on Monday that he would sign an order on his first day back in office that would put a 25% tariff on all goods from Mexico and Canada and an extra 10% tariff on goods from China.
He said the tax hikes would “remain in effect until such time as Drugs, in particular, Fentanyl, and all Illegal Aliens stop this Invasion of our Country!”
Sheinbaum told the press on Tuesday that “one tariff will be followed by another, and so on, until we put joint ventures at risk.”
General Motors, Stellantis, and Ford Motor Company were named as Mexico’s main exporters to the US and companies that tariffs could hurt.
“Why tax them and put them at risk?” Sheinbaum also said that tariffs “would cause inflation and job losses in both the US and Mexico.”
It is estimated that 76% of the cars made in Mexico are sent to the US.
More than 2% fell in one day, making Tuesday the worst day for the Mexican peso against the dollar since March 2022.
The head of economic analysis at the bank Banco Base, Gabriela Siller, said Trump may have made the tariff threat in the same casual way he has done so in the past.
“But if Mexico says, ‘We will respond with tariffs,’ Trump will really put them in place,'” she told the Associated Press.
Mexico sends more goods to the US than any other country, and its economy depends a lot on its northern neighbor.
The US bought 82.7% of Mexico’s exports in the first quarter of 2024. Over the next 10 years, trade between the two countries is expected to grow by 300%.
An ex-US trade official and vice president at the Asia Society Policy Institute, Wendy Cutler, told AFP that this means Mexico “remains limited in its ability to walk away from President-elect Trump’s threats.”
The past as a guide
The US put 25% tariffs on steel and 10% on aluminum imports from Mexico during Trump’s first term in office. These tariffs were lifted in 2019.
In 2019, Trump’s administration also said they would put up to 25% tariffs on all goods coming from Mexico. They said these tariffs would stay in place until Mexico “substantially” stopped the “illegal” flow of migrants through its borders.
In response, Mexico put tariffs on about $3 billion worth of US goods, such as steel, pork, fresh cheese, apples, and more. The tariffs ranged from 7% to 25%.
Derek Scissors, a senior fellow at the think tank American Enterprise Institute, said on Monday that going after Mexico in addition to China would “greatly increase” the risks of inflation.
During his campaign for president, Trump promised to put in place harsh tariffs. However, his first term suggests that the broad threats, which have reverberated through global markets and weak sectors like the auto industry, might be a form of his long-favored “leverage,” as BI previously reported.
Trump has chosen Scott Bessent to be his treasury secretary. He has said that tariffs are a “negotiating tool.”
President Sheinbaum, meanwhile, said, “Dialogue is the best way for our two countries to understand each other, live in peace, and grow economically.”
Plus, “I hope our teams can meet soon.”