Tariff Tension: Trump's Trade Threats and Economic Implications

U.S. President-elect Donald Trump plans to impose 25% tariffs on Mexico and Canada, potentially triggering a trade war. Analysts expect negative effects on Mexico's economy and equities, and a review of the USMCA agreement is anticipated in 2026, increasing risk aversion in Mexico.

In a bold move, President-elect Donald Trump has threatened to impose a 25% tariff on major U.S. trade partners Mexico and Canada, a decision that could spark a trade war. Financial analysts have swiftly responded to the announcement, forecasting significant implications for Mexico, a primary partner representing 15.8% of U.S. trade.

Trump's strategy extends beyond North America, with additional tariff threats aimed at China, the third-largest partner. Market economist Giulia Bellicoso warned of potential setbacks in Mexican equities, expressing doubts about near-shoring optimism and cautioning that Trump's trade policies may dampen foreign investment.

As the USMCA agreement awaits review in 2026, economic experts anticipate increased risk aversion, particularly in Mexico. Moody's Analytics predicts a downturn in Mexico's GDP growth, suggesting broader economic impacts and heightened financial volatility in the coming years.

(With inputs from agencies.)