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  HOME | Mexico

Mexican Peso Plunges on Trump Tariff Threat

MEXICO CITY – The peso suffered its biggest drop of the year against the dollar on Friday after US President Donald Trump threatened to impose tariffs on Mexico unless it takes aggressive steps to stop the flow of illegal migrants from Central America.

At 8.30 am, the peso was trading at 19.75 to the dollar, down 3.46 percent from Thursday’s close of 19.09.

By the end of trading on Friday, the peso recouped some of the early loss, climbing to 19.66 against the greenback for a net decline of 2.99 percent compared with the previous session.

The peso gained 0.31 percent against the greenback on Thursday after President Andres Manuel Lopez’s government formally asked the Mexican Senate to ratify the United States-Mexico-Canada Agreement (USMCA) on trade.

Signed last fall, the USMCA is meant to replace the 1994 North American Free Trade Agreement.

Late Thursday, however, Trump announced on Twitter that he would impose a 5 percent tariff starting June 10 on all Mexican imports unless the neighboring country halts the northward flow of US-bound undocumented migrants.

“The Tariff will gradually increase until the Illegal Immigration problem is remedied,” he added.

A subsequent statement by the White House laid out a calendar of potential escalating tariffs.

“If the crisis persists ... the Tariffs will be raised to 10 percent on July 1, 2019. Tariffs will be increased to 15 percent on August 1, 2019, to 20 percent on September 1, 2019, and to 25 percent on October 1, 2019,” the statement said.

The peso slumped to more than 20 units to the dollar on Dec. 1, when the leftist Lopez Obrador took office, but the Mexican currency had been trending upward since then, even dipping below 19 to the greenback on several occasions.

A move by Washington to levy tariffs on all Mexican imports would inflict serious economic pain on the Aztec nation.

Mexico shipped $328 billion in products – mainly vehicles and vehicle components – to the US during the first 11 months of 2018, representing 79.4 percent of the country’s total exports.

The US-Mexico border has been the scene of a months-long crisis, with a growing flow of undocumented migrants – mostly Central American families seeking asylum – trying to make their way to the US.

A total of 92,831 migrants crossed the US-Mexico border in March and that number rose to 98,977 in April, levels not seen over the past decade.

 

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