Colombian Peso Faces Volatility Amidst US Tariff Dispute
Colombian traders anticipate market volatility following a dispute with the US over deportees, which briefly triggered tariff threats from President Donald Trump.
Trump had announced a 25% emergency tariff on Colombian goods, prompting Colombia to reverse its decision to refuse migrant returns. The potential move sparked fears of an asset selloff and a decline in emerging market currencies.
"The Colombian peso will benefit from market relief, but regional currencies may face risks of similar tactics in the future," noted Homin Lee, a macro strategist at Lombard Odier. "We remain cautious on the economy and currency."
The tariff headlines could impact bond, currency, and equity markets upon Monday's open. Before a deal was reached, Credicorp Capital Colombia's chief economist predicted peso weakness and a potential recessionary trajectory.
Trump initially ordered a 25% tariff, set to increase to 50% within a week. Colombian President Gustavo Petro threatened retaliatory tariffs.
While Colombia's swift resolution provides some reassurance, it highlights Trump's inclination to leverage tariffs in policy disagreements. Investors who had initially perceived Colombia as relatively immune to tariff risks may now face increased risk premiums.