Mexican President Claudia Sheinbaum reads a letter to U.S. President-elect Donald Trump warning that tariffs will cause inflation and job losses in both countries at the National Palace in Mexico City, Mexico, November 26, 2024.
President of Mexico | via Reuters
Mexican President Claudia Sheinbaum said Wednesday that Mexico would retaliate if U.S. President-elect Donald Trump implemented 25% flat tariffs proposed by her government, which she said would cost 400,000 U.S. jobs. warned that U.S. consumer prices could rise.
“If the United States raises tariffs, Mexico will raise tariffs,” Scheinbaum said at a news conference, marking the most significant retaliatory trade move the country has yet to make against its largest trading partner. stated in a clear statement.
Mexico’s Economy Minister Marcelo Ebrard, speaking alongside Sheinbaum, called for more regional cooperation and integration rather than tit-for-tat import tax wars.
“This is an unfair blow,” Ebrard said of President Trump’s proposed tariffs, which appear to violate the USMCA trade agreement between Mexico, Canada and the United States.
Ebrard warned that the tariffs would lead to huge job losses and lower growth rates in the United States, hurting American companies that produce in Mexico by effectively doubling the taxes they pay. “The impact on businesses will be significant,” he said.
Ebrard added that the proposed tariffs would hit top border exporters in the automotive sector particularly hard. ford, general motors and Stellantis.
Ebrard noted that 88% of pickup trucks sold in the U.S. are manufactured in Mexico, and prices will likely rise. These vehicles are popular in rural areas that overwhelmingly voted for Trump. “Our estimates are that the average price of these vehicles will increase by $3,000,” Ebrard said.
Mr. Sheinbaum and Mr. Trump spoke by phone late Wednesday to discuss Mr. Trump’s top agenda items.
President Trump has said the tariffs will remain in place until the flow of drugs, particularly fentanyl, and immigrants into the United States is curtailed.
Trump said in a post on his Truth Social platform that Sheinbaum had “agreed to stop immigration into the United States through Mexico, effectively closing our southern border.” He said the conversation was “very productive.”
Sheinbaum later responded in a phone call with President Trump that he had developed Mexico’s immigration strategy to “take care” of migrants before they arrive at the U.S.-Mexico border.
“Mexico’s position is not to close the border, but to build bridges between the government and the people,” she added.
The Mexican peso rose as much as 1% against the dollar in after-hours trading on Wednesday, reversing losses recorded the previous day.
Many analysts view President Trump’s tariff threats as more of a negotiation tactic than trade policy.
David Cole, chief economist at Julius Baer, said: “The lack of a clear connection between this threat and trade issues is an example of the new president’s negotiating strategy to achieve goals that have little to do with trade.” “This suggests that they plan to use tariffs as
profit is gone
Mexico’s automobile industry is the country’s most important manufacturing sector and is exported primarily to the United States. This represents nearly 25% of all North American vehicle production.
Barclays analysts said they estimate that the proposed tariffs “could wipe out virtually all profits” for the Detroit Three automakers.
“It is generally understood that imposing a flat 25% tariff on all vehicles and goods from Mexico or Canada could have a devastating impact; We are underestimating the potential to give,” they wrote in a note Tuesday.
Trump transition team spokesman Brian Hughes said the tariffs protect American manufacturers and workers from “unfair practices of foreign companies and foreign markets.”
Hughes said President Trump will implement policies that make life more affordable and more prosperous in his country.
GM and Stellantis declined to comment. Ford didn’t comment on how the threatened tariffs would affect its business, but said it makes more cars in the U.S. than most major automakers.
Mexico’s auto industry association AMIA said it was preparing for all possibilities and waiting for formal action to be taken.
The International Finance Association, a trade group for the global financial services industry, warned that relations between Mexico and the United States will be difficult going forward.
“The imposition of tariffs and other policies that affect exchange rates and commodity prices, which ultimately lead to increased protectionism, could have significant regional implications,” the report said.
The USMCA is scheduled to be reviewed in 2026.
Katia Goya, head of international economics at Grupo Financiero Banorte, said the three USMCA countries could seek a major renegotiation of the agreement, rather than simply rubber-stamping its continuation in its current form. Said it was expensive.
“The impact of the trade tensions situation means lower economic growth in the United States, higher unemployment and higher inflation,” Goya said.
Ebrard said USMCA trade volume reached $1.78 trillion in the first nine months of this year.
“Tariffs can divide us and divide us,” Ebrard said. “Mexico does not want conflict or division, but to build a stronger region.”
