The Mexican peso has weakened in recent days amid growing fears that US president Donald Trump's new wave of tariffs could derail the US economy and, in turn, slash Mexico's economic growth, financial analysts said.
After Trump announced a series of new import tariffs on what he dubbed "Liberation Day" on 2 April, the peso initially reacted positively, as Mexico was largely spared from the measures, thanks to protections under the US-Mexico-Canada (USMCA) free trade agreement.
The current tariff structure largely remains in place, which means zero tariffs on products under the USMCA agreement, except for steel, aluminum and finalized// assembled automobiles. Auto parts under USMCA still face zero tariffs. These exceptions, and other non-USMCA-compliant products, maintain 25pc tariffs on non-US content, analysts Barclays said.
The peso appreciated more than 3.2pc to Ps19.97/$1 on 3 April from Ps20.4/$1 on 2 April, according to data from Mexico's central bank (Banxico).
The exemptions could make Mexico more attractive in the medium- and long-term to manufacturers aiming to avoid US tariffs, Barclays said.
Yet, investors are now concerned about the broader economic fallout of the escalating US-China trade conflict.
"The Mexican peso is one of the most depreciated currencies [as of 7 April], because even though Mexico has not been hit with reciprocal tariffs and benefits from USMCA, the economic impact of tariffs on the US economy could significantly affect Mexico," said Gabriela Siller, chief economist at Mexican bank Banco Base.
The peso weakened to Ps20.50/$1 on 4 April, from Ps19.97/$1 on 3 April, and continued weakening, closing at Ps20.69/$1 on 7 April, a 2.3pc depreciation over the last week.
Year over year, the peso has tanked 21pc, affected by multiple reforms diminishing Mexico's business environment that passed in late 2024, Trump's electoral victory in November, and now by Trump's tariffs.
Mexico's GDP is expected to grow by 0.2pc this year, according to a new Citi survey of 32 bank analysts, with nine forecasting zero or negative growth because of the potential fallout from US trade policy.
On 1 April, Mexico's finance ministry lowered its 2025 GDP forecast to 1.5–2.3pc, down from 2–3pc. That's still more optimistic than the central bank and private analysts, who expect growth of only 0.7pc, citing uncertainty over US policy and tariff threats.
