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Peso plunges vs the US dollar after Trump announces Mexican import tariffs

Peso plunges vs the US dollar after Trump announces Mexican import tariffs


Peso plunges vs the US dollar after Trump announces Mexican import tariffs

Mexican one thousand pesos bills are run through a counting machine inside a currency exchange store in Mexico City, Mexico.

Susana Gonzalez | Bloomberg | Getty Images

The Mexican peso fell more than 3% against the dollar on Friday on news the U.S. could slap tariffs on all Mexican imports next month.

President Donald Trump said Thursday that on June 10 the United States will impose a 5% tariffs on all Mexican imports. The president said these levies will stay in place until illegal migrants stop coming into the U.S. from Mexico.

The peso was down as much as 3.5% earlier on Friday, it’s biggest drop since October 29. 

The move pushed it to 19.8275 against the dollar, a new high for the year for the greenback vs. the Mexican currency.

Mexico was the second-largest importer of goods into the United States in 2018 and is the largest foreign supplier of agricultural products to the U.S., totaling $26 billion last year, according to the U.S. Trade Representative’s office.

Mexican President Andrés Manuel López Obrador responded to Trump’s threat with a letter saying that “social problems cannot be resolved with taxes or coercive measures.”

If the illegal migration crisis is mitigated by Mexico the tariffs will be removed, the White House said in a statement. However, if action isn’t taken by the Mexican government, the U.S. will again hike tariffs. The White House said levies on Mexican imports could go as high as 25% across all goods.

“These tariffs would be a big deal for Mexico. Mexican exports to the US are equivalent to almost 30% of its GDP, a lot of which consists of shipments of vehicles,” William Jackson, chief emerging markets economist at Capital Economics said in a note to clients Friday.

The iShares MSCI Mexico ETF (EWW), which tracks Mexican stocks, pulled back more than 4% in premarket trading, on pace for its worse day since November.

Factoring in trade fears with China on top of new Mexico tariffs, stocks plummeted Friday. The Dow Jones Industrial Average was down more than 300 points.

—with reporting from CNBC’s Michael Bloom 

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