News
04/03/25
Mexican peso dips, recovers on tariff hopes
Houston, 4 March (Argus) — The Mexican peso weakened on the US decision to go
ahead with the 25pc tariff on all imports from Mexico and Canada Monday, but it
recovered some losses today, suggesting the market is hopeful the tariffs may be
short-lived. The Mexican peso lost 1.3pc to close at Ps20.71 to the US dollar
Monday afternoon, according to data from Mexico's central bank. The declines
came as US president Donald Trump late Monday reaffirmed that he intended to
impose 25pc tariff on all products coming from Mexico, effective early 4 March.
The peso on Tuesday continued its slide to the dollar, reaching Ps 21/$1 briefly
in the intraday market before paring its losses and ending the day stronger at
Ps 20.74/1$, according to Mexican bank Banco Base and Mexico's central bank
data. Sentiment in the market is that the US administration will lift the
tariffs sooner rather than later because of deep implications for the US
economy. "The exchange rate and volatility have not skyrocketed, as the market
speculates that the US government could withdraw the tariffs soon and that their
imposition is mainly intended to give credibility to Donald Trump's threats,"
said Gabriela Siller, head of the financial analysis department at Banco Base,
on her X account. The tariff will especially affect Mexican agricultural exports
such as tomatoes, avocados or some vegetables, as well as the automobile
industry, which heavily relies on Mexico to build cars that are sold in the US.
In the energy sector, tariffs could partially disrupt Pemex's crude exports to
the US, which would need to be diverted to other countries, especially to Asia,
to avoid the 25pc tariff. Pemex primarily sells crude under evergreen or
long-term contracts, allowing it to set prices and volumes buyers must accept.
These agreements vary in duration, with some being indefinite and others
requiring a minimum purchase period. The 25pc tariff imposed by Trump's
administration could simply be added to Pemex's benchmark price and leave US
buyers to decide whether to accept it. If they decline, Pemex could offer its
crude at a discount to other buyers. Last week, Pemex management said it is
prepared to change its commercial strategy in case the tariffs enter into
effect. Pemex exported about 505,000 b/d of crude to the US last year, or 60pc
of Mexico's crude exports in 2024, vessel tracking data show. The state owned
company is likely to also be affected through its exports of high-sulphur fuel
oil (HSFO) to US Gulf coast refiners, which are also optimized to convert HSFO —
a low-value byproduct — into higher-value fuels like gasoline and diesel. The
state-owned company exported around 130,000 b/d of HSFO to the US in 2024, down
from 163,000 b/d in 2023, according to Vortexa. By Édgar Sígler Send comments
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