Mexico’s Tariff Turnaround?

The Mexican peso and Canadian dollar both saw notable declines right before the 25% tariffs were implemented. The US markets fell in early trading as CONFIDENCE rapidly declined with these tariff threats. We saw the Dow drop over 650 points early Monday, only to turn around after it was stated that tariffs on Mexico would be postponed. The Dow dropped so quickly simply because foreign capital began leaving the US markets. Canada and China plan to take matters to international court. Mexico has decided to placate Trump to buy time, sending 10,000 Mexican troops to secure the US southern border.

“It was a very friendly conversation wherein she agreed to immediately supply 10,000 Mexican soldiers on the border separating Mexico and the United States,” Trump said in a social media post on Truth Social. “These soldiers will be specifically designated to stop the flow of fentanyl, and illegal migrants into our country.” Mexico’s President Claudia Sheinbaum has asked Trump to delay tariffs by one month.

The same exact situation happened under the last Mexican administration of Andrés Manuel López Obrador. Trump threatened tariffs and Obrador sent the National Guard to the border. Yet, this president seems less likely to work alongside Trump for long.

Now in 2024, Mexico sent 78% of ALL their exports to the United States. That’s an astounding 37% of Mexico’s GDP. One may think that Mexico would be forced to agree to anything presented by Trump but that is not the case. Mexico dethroned China to become the top exporter of goods to the US in 2023, exporting $475.6 billion to the US in 2023, a 5% YoY uptick. Mexico had stated that they would implement retaliatory tariffs but never laid out an exact plan. Could they be using this month to buy time?

Trump has not addressed the reason that US manufacturers are moving to Mexico. Now there are new challenges. So you can make it in America, but who will you sell to when everyone is paying a markup? Nations once lined up to sell to Americans, but rest assured they will look to offload their goods elsewhere with such stiff penalties. They sold to Americans and were forced to use the dollar. And who will buy? Consumers hide their wallets amid uncertainty and this entire debacle is causing massive volatility internationally.

As I mentioned in an earlier post, Trump and his administration fail to comprehend that asset shortages lead to inflation. We will have shortages or a speculative boom, causing currency declines and leading to more inflation. Everything is connected. Creating unemployment outside the US will lead to fewer consumers and declining business, and the US companies will be forced into layoffs. The US economy will shrink as the world economy shrinks and this entire tariff debacle will be remembered in history for igniting the global recession if not outright depression in some nations.