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Mexican markets are set for weeks of uncertainty and volatility, analysts say, after President Claudia Sheinbaum persuaded her US counterpart Donald Trump to suspend the introduction of a 25% import tariff on Mexican goods for a month while they continue talks on trade, drugs and migration. In a surprise announcement on Monday morning, Sheinbaum said the tariffs on Mexican goods that were set to take effect in a matter of hours would be put on hold following talks with the US leader. As part of the agreement, Mexico will deploy 10,000 members of the National Guard to its northern border to combat drug trafficking into the US, particularly fentanyl, Sheinbaum said Monday on X. In return, the US has pledged to take action against the flow of high-powered weapons to Mexico, she said. Trump, who on Saturday signed an executive order imposing tariffs on imports from Mexico, its biggest trading partner, and from Canada and China, said on his Truth Social platform on Monday that he and Sheinbaum would hold further talks over the next month in an effort to reach a “deal.” Canada’s Prime Minister Justin Trudeau also said later that he had secured a similar 30-day pause on US tariffs. MARKET SWINGS Sheinbaum faces a period of tough negotiations ahead with no guarantee of success, and the risk that tariffs take effect next month and deal a devastating blow to the Mexican economy is likely to weigh on markets in the days and weeks ahead, analysts said. “Should President Trump’s suggested 25% tariff become reality, we think the most exposed rated corporate sectors in Mexico would be auto suppliers, metals and mining, oil and gas, agribusiness, durable goods, and alcoholic beverages,” S&P Global Ratings said in a report Monday. It added that “such a tariff represents a significant challenge to corporate credit quality in Mexico.” Roberto Solano, head of economic, FX and stock market analysis at financial services firm Monex in Mexico City, said the coming month will likely be marked by high volatility in the price of Mexican assets. Enrique Covarrubias, chief economist and head of research at Actinver said Trump’s communication strategy is highly aggressive, which exacerbates market volatility. BACK DOOR Covarrubias said Trump could pressure Sheinbaum to play a strategic role in curbing Chinese exports to the US, some of which enter indirectly via Mexico. “A significant portion of Mexican imports come from Asia, and this is certainly an issue that will be part of the negotiations,” he said. The Mexican peso ended the day higher against the US dollar after earlier falling to its lowest level in three years, according to Reuters. The Mexican Stock Exchange was closed due to a public holiday. Speaking in a webcast Monday morning before Sheinbaum announced the one-month pause, Finance Minister Rogelio Ramírez de la O sought to reassure investors about Mexico’s ability to contain any selloff in the local currency. Ramírez told investors that Mexico has international reserves of $230 billion with which to support the peso as well as access to credit lines totaling $44 billion from the International Monetary Fund and the US government. NEGOTIATING TACTICS For some, Monday’s eleventh-hour agreement reinforces the view that the threat of tariffs is just a bargaining chip, and their introduction is something Trump himself would like to avoid, given the risk they could fuel inflation, keep upward pressure on interest rates, and ultimately hurt the US economy. “The tariff issue is only used as a negotiation tool, and this shows the US president would not like to impose these tariffs either,” said Jacobo Rodríguez, an analyst at Roga Capital. Nevertheless, negotiations between the two countries are expected to be challenging, given the tight timeframe, said Álvaro Vértiz, country head and partner at US-based advisory firm DGA Group. “There will be some uncertainty because a one-month period is very short to achieve an adequate negotiation on three such fundamental issues as migration, fentanyl, and trade,” he said. In an unexpected move, Ecuador’s President Daniel Noboa announced on Monday that the country will impose a 27% tariff on Mexican imports in an effort to support local manufacturers. Noboa is an ally of Trump — he was one of the few Latin American leaders invited to his January 2o inauguration — and he is seeking reelection in a presidential vote this Sunday.
