The Mexican peso depreciated sharply against the US dollar on Monday and continued to weaken on Tuesday after Donald Trump pledged to impose a 25% tariff on all Mexican and Canadian exports to the United States on the first day of his second term as U.S. president.
The Bank of Mexico’s official USD:MXN exchange rate at the close of markets on Monday was 20.28.
However, the peso depreciated to 20.71 to the greenback shortly after Trump outlined his tariff plan on his social media site Truth Social on Monday evening.
The slide to 20.71 represented a 2.1% depreciation for the peso compared to the Bank of Mexico’s end-of-day rate.
The peso recovered somewhat in early trading on Tuesday, but at 11:45 a.m. Mexico City time, it was trading at 20.81 to the dollar.
Gabriela Siller, director of economic analysis at Mexico’s Banco Base, said on X shortly after 10:30 a.m. that the Mexican peso was the currency that had depreciated the most against the US dollar on Tuesday.
She also noted that the Canadian dollar had depreciated to its weakest position against the US dollar since April 2020, when the COVID-19 pandemic was in its early stages.
On Monday, Siller said that the Mexican economy will go into recession if Trump keeps his word and imposes a 25% tariff on Mexican exports to the United States. She said Tuesday that if the incoming U.S. president’s tariff threat “materializes,” foreign companies will “gradually” leave Mexico.
Supported by strong inflows of remittances and foreign investment as well as the substantial difference between the Bank of Mexico’s key interest rate and that of the United States Federal Reserve, the peso performed extremely well against the US dollar in 2023 and hit an almost nine-year high of 16.30 to the greenback in April.
However, it depreciated significantly after the comprehensive victories of Claudia Sheinbaum and the ruling Morena party in the presidential and congressional elections on June 2.
The federal government’s judicial reform – passed by Congress in September – has weighed on the peso, as have a range of other factors including previous tariff threats made by Trump and the incoming U.S. president’s cabinet picks.
Mexico News Daily
Source: Mexico News Daily
