Analysts react to Trump's threat of North American tariffs
Updates with details from Banorte and Vector Analisis notes, adds quote from Banco Base analyst
By Sarah Morland
MEXICO CITY, Nov 26 (Reuters) -Financial analysts on Tuesday reacted to a threat from U.S. President-elect Donald Trump to impose 25% tariffs on top trade partners Mexico and Canada when he takes office for a second term in January in a move that could trigger a trade war.
Mexico is the country's top trade partner as of September, representing 15.8% of total trade, followed by Canada at 13.9%.
Trump also threatened "an additional 10% tariff, above any additional tariffs" on imports from China, the third-largest trade partner at 11.9%.
CAPITAL ECONOMICS
"We suspect investors may be under-appreciating the impact from Trump's policies on Mexico," said Giulia Bellicoso, a markets economist. "We suspect Trump's tariffs will take a toll on Mexican equities by denting optimism about nearshoring and limiting investment into the country."
"We expect Trump to start another trade war," she added.
CIBANCO
"We believe Trump's announcement is a tactic to negotiate with these three countries, his main trade partners, from a position of strength, taking into account that imposing tariffs would also be negative for the U.S. economy," CIBanco said in a note.
"As such the final result of the tariff threat could be less severe once negotiations with the respective parties conclude."
BANCO BASE
"The U.S.-Mexico-Canada Agreement (USMCA) will be reviewed in July 2026, which is expected to raise risk aversion especially in Mexico, as both U.S. and Canadian officials have mentioned that they would be better off with bilateral agreements," Banco BASE said.
It added that the tariff threat "raises the likelihood that Trump's second term will be more radical, which represents a risk for Mexico's export sector."
"Trump's threat implies that he could sacrifice the U.S. economy in the short term in order to curb the immigration and drug crises," the group's director of economic analysis, Gabriela Siller, added on X.
ALLIANCEBERNSTEIN
"As in previous instances of tariff threats, the exchange rate will play its role as a shock absorber reflecting the risks stemming from a persistent change in the commercial relationship," said Armando Armenta, a senior economist at the asset manager.
"However, trade linkages among USMCA members run deep, and a cooperation agreement on the control of illegal drug trafficking, labor migration, border protection and goods trade could quickly reverse the move."
MOODY'S ANALYTICS
"The Mexican economy will be one of the most exposed to negative effects from the economic policies of U.S. President Trump," said Moody's Analytics, predicting lower growth particularly in the next two years as investment, remittances and the finance sector could all be shaken by the volatility.
It said it was cutting its forecast for Mexico's Gross Domestic Product (GDP) growth next year to 0.6% from a prior expectation of around 1%, and that it now predicts growth of around 1.6% in 2026 compared to a prior estimate of 2.5%.
BANORTE
Economists at Mexican bank Banorte warned about "caution among investors as increased trade and political tensions between the U.S. and other countries loom on the horizon."
VECTOR ANALISIS
Trump's tariff threats against Mexico, Canada and China "could violate free-trade agreements and affect the three economies," Vector Analisis said in a post to social media.
Reporting by Sarah Morland, Natalia Siniawski, Raul Cortes, Aida Pelaez-Fernandez and Rodrigo Campos; Editing by Daniel Wallis
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
