Mexican Peso Declines as Trump Reaffirms Tariff Threats

The Mexican peso experienced a 1% decline against the U.S. dollar after President Donald Trump reiterated his intention to impose 25% tariffs on imports from Mexico and Canada. The peso closed at 20.71 per dollar, reversing an earlier 0.5% gain during the session. This announcement led to significant market volatility, with investors adopting a defensive stance toward the Mexican currency.

The market has not fully priced in the tariff threats, but the possibility remains a key concern. Additionally, Trump mentioned a potential decision on whether to exclude Canadian and Mexican oil imports from the tariffs. The Canadian dollar also reached a five-year low amid the uncertainty. U.S. Commerce Secretary nominee Howard Lutnick suggested that Canada and Mexico could avoid tariffs by swiftly addressing fentanyl trafficking.

This development underscores the sensitivity of the Mexican peso to U.S. trade policy announcements. Analysts note that the peso's recent movements suggest a depreciation trend, with projections pointing to a possible range between 20.15 and 20.22 pesos per dollar, though resistance at 19.97 could slow further losses.

Investors are closely monitoring the situation, as the potential implementation of tariffs could have significant implications for Mexico's economy, which is heavily reliant on trade with the United States. The outcome of these trade negotiations will likely continue to influence the peso's performance in the near term.