Puerto Vallarta, Mexico – The Mexican peso opened Friday’s session with modest gains against the U.S. dollar, buoyed by growing skepticism over U.S. President Donald Trump’s threats to impose tariffs on imports from Mexico and Canada starting March 4. At around 07:35 a.m. local time, the peso traded at 20.40 to the dollar—an appreciation of 0.26%, according to real-time data from Investing.com—partially reversing the 0.3% decline it recorded in the previous session.
Waning Credibility of Tariff Threats
Despite repeated warnings from the White House, market observers are questioning the feasibility and scope of the proposed tariffs. This skepticism follows recent cooperation between the United States and Mexico on high-profile extraditions—including the surrender of renowned drug trafficker Rafael Caro Quintero and 28 other individuals—which some analysts interpret as a sign of strengthening diplomatic ties.
“Today, the peso is part of the 35% of emerging currencies that are gaining ground against the dollar, after evaluating the economic data of the week and considering Trump’s comments on the imposition of tariffs on March 4. The credibility of the United States’ threats has diminished, after assessing the possibility of agreements between countries or a smaller-scale tariff measure,” said Janneth Quiroz Zamora, Director of Economic, Foreign Exchange and Stock Market Analysis at Grupo Financiero Monex.
U.S. Economic Data and Federal Reserve Outlook
On the U.S. side, the latest Personal Consumption Expenditures (PCE) Price Index came in at an annualized rate of 2.5% in January, slightly below the previous 2.6% and in line with analyst expectations. Some experts see this as a favorable sign for the Federal Reserve’s approach to monetary policy.
“By meeting expectations and slightly moderating annual rates, it could help facilitate the Fed’s work on interest rates, especially at a time when it seems that the growth of this economy is beginning to slow down,” explained Jorge Gordillo Arias, Director of Economic and Stock Market Analysis at CIBanco. “It would also help consolidate the current market idea of two rate cuts throughout 2025, with a first cut in June and a second in September.”
Extraditions Signal Cooperation
In a notable development that may further ease trade tensions, the Mexican government handed over Caro Quintero—once among the country’s most notorious drug lords—along with 28 other alleged traffickers to U.S. authorities on Thursday. The move is seen by some as an effort to demonstrate bilateral collaboration.
“This massive extradition operation, unprecedented in Mexico’s recent history, is taking place in the midst of negotiations between the two countries over tariffs and appears to be seeking to send a signal of cooperation in the fight against organized crime,” Gordillo Arias added.
Officials in Mexico City hope this gesture could prompt President Trump to postpone or scale back the tariffs.
“With this action, it is expected that the universal tariff on Mexican products will be postponed again,” said Gabriela Siller Pagaza, Director of Economic and Financial Analysis at Grupo Financiero Base.
Market Performance and Outlook
Even with these developments, the U.S. dollar index—which measures the greenback against a basket of major currencies—has edged up by about 0.08% to 107.33 points. Yet the peso’s resilience suggests traders believe a more measured approach to U.S. tariffs could prevail.
“From our perspective, investors’ cautious sentiment could extend until there is a clearer picture of the tariff environment, and therefore, the inflation outlook,” noted Quiroz Zamora of Monex.
Should the Mexican currency hold near its current levels through the day’s close, it would mark its second consecutive week of losses versus the dollar, with a mild depreciation of around 0.15% for the week. However, the peso still shows a monthly gain of 1.23%, building on its positive performance in January.
As investors weigh Mexico’s efforts to cooperate with the U.S. government against the possibility of tariffs and further shifts in Federal Reserve policy, the peso’s movement remains a key barometer for broader regional sentiment—and a reflection of the evolving diplomatic dance between Mexico and its northern neighbor.
Puerto Vallarta, Mexico - The Mexican peso opened Friday’s session with modest gains against the U.S. dollar, buoyed by growing skepticism over U.S. President Donald Trump’s threats to impose tariffs on imports from Mexico and Canada starting March 4. At around 07:35 a.m. local time, the peso traded at 20.40 to the dollar—an appreciation of 0.26%, according to real-time data from Investing.com—partially reversing the 0.3% decline it recorded in the previous session.
