Mexico Hints at Retaliation to Trump’s Tariff Threats

President Claudia Sheinbaum Holds First Press Briefing Following US Elections

(Bloomberg) -- President Claudia Sheinbaum suggested Mexico could respond to Donald Trump’s threatened tariffs with levies of its own, warning the economic consequences would be dire.

Sheinbaum, reading aloud Tuesday from a letter she directed at the US president-elect after he vowed to slap 25% tariffs on all goods from Mexico and Canada, said cooperation would be a better way to curb the flow of migrants and illegal drugs.

“One tariff will be followed by another in response, and so on until we put common companies at risk,” Sheinbaum said at her daily press conference in Mexico City. “The main exporters from Mexico to the US are General Motors, Stellantis, and Ford Motor Company, which arrived 80 years ago. Why put in place a tariff that puts them at risk?”

Sheinbaum’s calls for collaboration instead of hostility reflect the delicate balance she has sought to maintain since Trump’s victory put her nation on the front line of a potential US trade war with China. She has largely avoided taking sides between Washington and Beijing, all while signaling to Trump that she would choose the US — Mexico’s top trading partner — if forced.

Sheinbaum’s letter included a similar nod, calling for joint discussions on the migration and fentanyl Trump cited in his tariff threat. She also pointed to Asian nations — rather than her own — as the original source of fentanyl entering the US, and said she hoped her team and his would be able to meet soon.

“It is publicly known that the chemical precursors used to manufacture fentanyl and other synthetic drugs illegally enter Canada, the United States and Mexico come from Asian countries,” Sheinbaum said. “International cooperation is urgent.”

She also noted that Mexico has detained more than 15,000 people over violence related to drug trafficking in the past year, and that the country is in the process of passing a constitutional reform that would make the production and distribution of fentanyl a “grave” crime.

Mexico’s peso sank to its weakest level in more than two years earlier in the day, exposing the country’s deep vulnerabilities to the trade conflicts he has promised to wage. In all, the currency fell 1.7% Tuesday, closing at 20.65 per dollar.

Mexico’s auto sector is particularly exposed to a conflict with the incoming administration in Washington, along with factories that export electronics, plastics and other manufactured goods to US consumers. The Latin American nation became the largest US trading partner as China’s import share declined in recent years, with the Mexican government estimating there’s now $800 billion annually in total trade between the neighboring countries.

“It’s not through threats or tariffs that the migratory phenomenon or drug consumption in the United States will be tended to,” she added. “Cooperation and mutual understanding are required to deal with these major challenges.”

During his campaign, Trump also threatened to turn the planned 2026 review of the US-Mexico-Canada Trade Agreement into an outright renegotiation, sparking fears about the future of a pact that along with its predecessor provided a boon to Mexico’s manufacturing sector.

The letter to Trump also highlighted how Mexico has cooperated with the US on migration policy at the two countries’ shared border. Mexico, acting at the behest of the US, has clamped down on transit routes and rounded up migrants who congregated near the border, sending them to the south of the country to await appointments for legal entry through a US government app. The use of that app, known as CBP One, has reduced border encounters by 75% through November 2024, Sheinbaum said in the letter to Trump.

“That’s why there are no longer migrant caravans heading to the border,” she read out. “Even then, it’s clear we need to find, jointly, a model for labor mobility as needed by your country, but that tends to the causes that lead families to leave their countries of origin due to need.”

Sheinbaum reiterated that the US should invest a portion of its military budget in peace building and development to tend to the root causes of migration. It’s an argument that echoes her predecessor, former president Andres Manuel Lopez Obrador, and one that she often repeated while on the campaign trail.

She added that her Economy Minister Marcelo Ebrard will present on Wednesday a report that will delve deeper into the negative effects the tariffs would have on US companies.

Sheinbaum also noted that she plans to send Canadian Prime Minister Justin Trudeau another letter that lays out how Mexico has supported the strength of the three nations’ trade relationship and noting that Lopez Obrador advocated for Canada to remain in the treaty in 2018.

--With assistance from Vinícius Andrade and Travis Waldron.

(Updates with additional comments from Sheinbaum’s letter throughout.)

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