Mexico Prepares Counter-Tariffs as Trump Threatens Economic Recession
Mexico's President Claudia Sheinbaum has initiated "Plan B" measures in response to President Trump's impending 25% tariffs, which could potentially trigger an economic recession in Mexico.
Mexico's Response
Sheinbaum instructed Economy Minister Marcelo Ebrard to implement non-tariff measures, the details of which remain undisclosed. Despite the looming tariffs, the Mexican president emphasized the importance of collaboration in addressing security, migration, and the fentanyl crisis.
Potential Economic Impact
Trump's tariffs pose a significant risk to Mexico, which heavily relies on the US as its primary trade partner. Analysts estimate that the tariffs could jeopardize 16% of Mexico's GDP and lead to a 30% decline in exports. Foreign investment and job creation could also suffer, potentially exacerbating Mexico's current economic slowdown.
Retaliatory Measures and Inflation
Mexico's retaliatory tariffs could escalate the trade dispute, leading to increased prices for imported goods in the US and potentially pushing Mexico's peso to record lows.
Trade Implications
Sheinbaum warned that the tariffs would undermine the US-Mexico-Canada free trade agreement (USMCA), resulting in higher prices for various goods in the US. Trump's retaliatory clauses would further intensify the trade war if Mexico and Canada respond with their own tariffs.
Reliance on Mexico
While US companies may seek alternative suppliers from other countries, experts believe that Mexico will continue to play a significant role as a trade ally. However, companies could become less dependent on Mexican imports as a result of the ongoing trade conflict.