Retaliation Thinks Mexico on Customs Trump – How the country’s economy is affected

The – like Canada – reacted yesterday Saturday (1.2.2025) to the 25% duties imposed on imports of Mexican products in the US by the American president. These duties, according to analysts, may affect exports, economic growth and the country’s currency. Mexico’s president, Claudia Shainbaum, immediately announced tariff and other measures to protect Mexican interests. The US absorbs 83% of the country’s exports, including cars, computers and agricultural products. Mexico has a large trade surplus with the US, which prompted Donald Trump to argue that America “subsidises Mexico”. CORVERSE Shainbaum did not specify exactly when these “tax measures” would be imposed in contrast to Canadian Prime Minister Justin Tridot, with whom she talked yesterday. She proposed to her American counterpart the establishment of a ‘working group with our best groups in the fields of safety and public health’ in order to address the issue of drug trafficking and immigration. Trump invoked Mexico and Canada’s laxity on these two issues to impose duties on them, despite the fact that the three countries are linked by the US-Mexico Canada Agreement (USMCA), a free trade agreement signed in 2020 during the Republican’s first term in the American presidency. In fact Trump accused the Mexican government of having “allied” with the drug cartels. “Sycophants”, replied Shainbaum. Trump’s decision is “a blatant violation of the USMCA, which we negotiated with him,” responded Marcelo Emphard Minister of Finance of Mexico, stating that he is “proud of Shanebaum’s calm and determination.” CORVERSE The 25% tariffs on Mexican exports to the US “are a direct threat to North America’s competitiveness and the economic stability of our country,” the Coparmex employers’ union said. “ Exports of cars, parts, computers, household electrical appliances and agricultural products will be significantly affected, which may cause a great economic slowdown, ” he added. Mexico’s economy, the 12th largest worldwide, increased by 1.3% in 2024, but retreated in the last quarter. The tariffs that Trump announced will push Mexico into recession, according to the projections of the Standard & Poor’s rating house. These duties will mainly affect the automotive sector and electronic products, which export 50% of their production to the US, as the British company Capital Economics reports. The Mexican car industry exported $36 billion worth of products to the US in 2023, while it accounts for 5% of the country’s GDP and produces a million jobs, according to the same source. But American consumers will also be affected “with higher prices, fewer products available, potential problems in the supply chain”, the Mexican government warned on Friday (31.1.2025). By imposing duties on the countries that provide them with thousands of products the US will inevitably see “price rise”, commented EU’s chief economist Gregory Daco, predicting 0.6% inflation in the first quarter of the year. Capital Economics also stressed that car parts will become more expensive, which will directly affect the American wallet. This appreciation “probably will be offset by the peso’s devaluation” (Mexican currency), making “the Mexican exports more competitive”, Ramse Gutiera, co-director of investment in Franklin Templeton. At the same time this devaluation “will make exports more expensive, leading to an increase in consumer prices and raw materials in Mexico,” he added. 25% of the parts of vehicles assembled and sold in the US come from Mexico, according to the American road network management service (NHTSA). For Kenneth Smith Ramos, a Mexican former official who in 2020 led the USMCA negotiation, which Trump had demanded, tariffs are the Republican’s tool to achieve results on immigration or security issues. Trump is delighted that he achieved “all he wanted” in immigration during his first term, when President of Mexico was Andrews Manuel Lopez Obrador, thanks to his threat of imposing duties.