Mexican President condemns US tariffs, vows retaliation

Mexican President Claudia Sheinbaum strongly criticised US President Donald Trump’s choice to impose a 25 per cent tariff on Mexican imports, calling it unjustified and dangerous to each nations. Sheinbaum additionally pledged that Mexico would reply with countermeasures however didn’t instantly disclose particular plans.

The implementation of those sweeping tariffs marks a serious shift in over three many years of financial cooperation between Mexico and the US, posing critical dangers to Latin America’s second-largest economic system. The 2 nations are one another’s major commerce companions, with industries like automotive manufacturing relying closely on cross-border provide chains established below their trilateral commerce settlement with Canada.

“This choice lacks any logical foundation and can in the end damage each our individuals and economies. Nobody advantages from this,” Sheinbaum acknowledged throughout her day by day press briefing. She introduced that additional particulars on Mexico’s response, together with potential retaliatory tariffs, could be revealed at a public occasion in Mexico Metropolis’s Zocalo sq. on Sunday.

Sheinbaum additionally confirmed plans to talk immediately with Trump later within the week, doubtless on Thursday.

Monetary markets reacted shortly to the information, with Mexico’s peso shedding roughly 1 per cent in opposition to the US greenback on Tuesday late night (Indian time), whereas the nation’s foremost inventory index (.MXX) dropped by greater than 1 per cent.

Sheinbaum warned that American companies and customers would bear the burden of upper costs, notably within the automotive sector, which she recognized as essentially the most weak.

Business specialists predict the tariffs may result in billions of {dollars} in further prices for automobile producers that produce autos or parts in Mexico. The Mexican authorities has beforehand highlighted that many pickup vehicles bought within the US — a car phase in style amongst Trump’s voter base — are assembled in Mexico.

After delaying the choice for a month, Trump introduced on Monday that the tariffs would proceed, citing Mexico, Canada, and China’s alleged failure to curb the stream of the drug fentanyl and its precursor chemical compounds into the USA.

In response, Sheinbaum defended Mexico’s efforts, stating that important actions had been taken through the 30-day grace interval to scale back fentanyl trafficking. In current weeks, Mexico has ramped up enforcement alongside its northern border by deploying 1000’s of troopers to key areas and extraditing almost 30 people accused of cartel-related crimes and different offenses.

US shares below strain as commerce battle escalates

Shares of main US firms have already taken a success following Washington’s newest commerce measures, with the newly imposed tariffs on Canada and Mexico anticipated to weigh closely on earnings throughout a number of industries. Automakers, retailers, and uncooked materials suppliers are among the many hardest hit.

Trump’s 25 per cent tariff on imports from Mexico and Canada covers over $900 billion in annual commerce. As well as, he doubled tariffs on Chinese language items to twenty per cent, citing Beijing’s function within the US fentanyl disaster. These new duties add to the earlier tariffs of as much as 25 per cent applied throughout his first time period.

China retaliated by asserting contemporary tariffs of 10-15 per cent on chosen US items beginning 10 March, as Canada joined Mexico in getting ready to strike again in opposition to their long-time commerce accomplice. The uncertainty rattled Wall Road, with economically delicate sectors like airways and banks main market declines. The S&P 500 noticed its worst buying and selling day of the 12 months on Monday after affirmation of the tariffs.

Automotive trade faces heavy losses

The auto sector is anticipated to bear the brunt of the brand new tariffs. In response to S&P International, the extra duties on Mexican and Canadian imports may eat up 10-25 per cent of annual EBITDA for affected US carmakers. The 25 per cent tariffs on metal and aluminium will even improve prices, notably for automakers that rely closely on these supplies.

J.P. Morgan analysts warn that the tariffs could have a direct impression on firms like Basic Motors and Ford, with some prices additionally trickling right down to suppliers, dealerships, and customers. The monetary toll might be extreme — GM is anticipated to lose round $14 billion, almost all of its projected international earnings earlier than curiosity and taxes for the 12 months, whereas Ford may see a $6 billion hit, wiping out roughly 75 per cent of its international EBIT.

Ford operates three manufacturing crops in Mexico, exporting almost 196,000 autos to North America within the first half of 2024 — 90 per cent of which have been destined for the US, based on Mexico’s AMIA. Stellantis produces 39 per cent of its North American autos in Mexico and Canada, whereas GM and Ford manufacture 36 per cent and 18 per cent there, respectively, per a Barclays report from November.

GM’s Canadian services play a vital function in manufacturing, assembling electrical vans, Chevrolet Silverado Heavy Responsibility vehicles, and key parts like V8 engines and dual-clutch transmissions. In response to the tariff information, Ford and GM shares dropped 2.8 per cent and 5.8 per cent, respectively, on Tuesday.

Homebuilders face rising prices

The US housing trade can also be bracing for elevated bills, as many uncooked supplies are imported from Mexico and Canada. The PHLX Housing Index (.HGX), which has already fallen 4.8 per cent this 12 months, dropped one other 1.2 per cent on Tuesday.

Tariffs on completed merchandise comparable to home equipment, electronics, cupboards, and fixtures from Mexico and China may additional drive up residence building prices, based on S&P International. Rising commodity costs, labour shortages, and elevated freight prices had already squeezed margins for constructing supplies firms, and the brand new tariffs may intensify that strain.

Aerospace trade in danger

Canada is a key participant within the US aerospace provide chain, serving because the nation’s prime import accomplice and third-largest export vacation spot for aerospace items. The most recent tariffs may considerably impression suppliers and plane producers, together with Boeing.

Boeing shares dropped 6.4 per cent as traders fretted about rising manufacturing prices. Canadian companies additionally manufacture essential parts, comparable to engines for Basic Dynamics’ Gulfstream and Textron plane, in addition to touchdown gear for Boeing and Airbus. In the meantime, Mexico’s quickly rising aerospace hubs in Queretaro and Chihuahua appeal to main trade suppliers, together with Honeywell.

Metal trade faces market volatility

Metal imports make up roughly 23 per cent of complete US metal consumption, with Canada, Brazil, and Mexico as the most important suppliers. Canada’s hydropower assets make it a number one producer of aluminium, accounting for almost 80 per cent of US major aluminium imports in 2024.

Alcoa, a serious aluminium producer, just lately warned that Trump’s tariff insurance policies may value 100,000 US jobs and wouldn’t be sufficient to incentivize home manufacturing. The corporate’s inventory fell 3.1 per cent.

The broader metal sector additionally suffered losses, with shares of US Metal, Nucor, Metal Dynamics, and Cleveland-Cliffs dropping between 5 and eight per cent.

Airline shares plunge amid financial considerations

Fears of an financial slowdown weighed closely on airline shares, with the S&P Composite 1500 Passenger Index tumbling 6 per cent, marking its worst efficiency in over a 12 months.

“As companies and retailers warn prospects about rising costs as a result of tariffs, there’s concern that buyers will reduce on discretionary spending, together with journey,” mentioned Michael Ashley Schulman, chief funding officer at Operating Level Capital, as quoted by Reuters.

Along with declining leisure journey, Schulman famous that companies may additionally scale back company journey bills in an effort to manage prices and protect margins.