Puerto Vallarta, Mexico – The Mexican peso extended its losses on Tuesday, briefly touching above the 21-per-dollar mark before settling at 20.93 per dollar—down 1.2 percent. The decline follows an announcement by President Claudia Sheinbaum that the government will unveil new tariff and non-tariff measures on Sunday in response to the recently imposed 25 percent U.S. tariffs on Mexican imports.
In a statement made during her daily press conference, President Sheinbaum criticized the U.S. government’s rationale for the new levies, which officials in Washington say are intended to pressure Mexico to curb drug trafficking and illegal migration. “We have decided to respond with tariff and non-tariff measures that I will announce in a public square next Sunday,” Sheinbaum said. “There is no motive, reason, or justification that supports this decision that will affect our people and nations.”
The peso has now lost 22 percent of its value since last April, driven largely by concerns surrounding trade tensions with the United States and lingering questions about domestic political and constitutional changes. Mexico’s bond market has also reflected signs of strain; borrowing costs have been declining steadily for two months amid expectations that slowing economic growth will prompt further interest rate cuts by the central bank.
A survey released Monday by Banco de México shows private-sector analysts projecting only 0.81 percent growth for the country this year, down from a prior forecast of 1 percent in January. The gloomy outlook has heightened concerns that the economy may struggle if tariffs remain in place for an extended period.
Lee Hardman, an analyst at MUFG, noted that while the peso has weakened, the market’s reaction has been relatively muted, considering the magnitude of the tariffs. “Price action suggests market participants remain hopeful that tariff increases will not be in place for long, which would help limit trade and economic disruption,” Hardman said.
However, if the tariffs persist, Mexico’s economy faces a growing risk of recession. “We continue to believe that both currencies—the peso and the Canadian dollar—could fall by around 5–10 percent in response to more persistent tariff increases,” Hardman added.
North of the border, the Canadian dollar has already lost around 4 percent of its value since President Trump’s election in November. In Mexico City, the local stock market dipped nearly 5 percent over the last two weeks, although it remains about 3 percent above levels seen before Trump’s election. Meanwhile, major Spanish banks with operations in Mexico, including Santander and BBVA, each saw their shares fall by more than 5 percent in European trading.
All eyes are now on President Sheinbaum’s upcoming announcement on Sunday. Market participants will be watching closely for details on how Mexico plans to counter the U.S. tariffs—whether through reciprocal taxes, regulatory measures, or alternative strategies—amid concerns that prolonged trade tensions could deepen the country’s economic challenges in the months ahead.
