Trade war? Mexico hints at retaliatory tariffs in response to Trump’s 25% tariff threat

Mexico vows equal retaliation to safeguard its economy

Mexican President Claudia Sheinbaum has warned that her administration is prepared to impose retaliatory tariffs should U.S. President-elect Donald Trump follow through on his threat to levy a 25% import duty on Mexican goods. Speaking on Tuesday, Sheinbaum emphasized that such actions would harm businesses on both sides of the border, particularly industries like automotive manufacturing that depend on integrated supply chains.

“One tariff would be followed by another in response, and so on until we put at risk common businesses,” Sheinbaum said. She also pointed out that Mexican efforts to curb migration have been significant, though the nation continues to face challenges with drug cartels and weapons smuggling from the United States.

Tariffs could violate USMCA and harm both nations’ economies

Economic analysts have raised concerns over the legality and practicality of imposing tariffs under the USMCA trade agreement, which prohibits arbitrary duties among the U.S., Mexico, and Canada. Sheinbaum stressed that such tariffs would disrupt vital industries, inflate costs for consumers, and jeopardize jobs on both sides of the border.

“It is unacceptable and would cause inflation and job losses in Mexico and the United States,” she said, citing General Motors as an example of companies that would face severe disruption.

A shift in tone under President Sheinbaum

Sheinbaum’s response reflects a departure from the cooperative tone set by her predecessor, Andrés Manuel López Obrador. While López Obrador maintained a collaborative relationship with Trump during his first term, Sheinbaum has taken a firmer stance. “We negotiate as equals, there is no subordination here,” Sheinbaum declared, though she expressed optimism for reaching a resolution through dialogue.

Analysts warn of potential escalation

Gabriela Siller, an economist with Banco Base, warned that Trump’s threats, paired with Sheinbaum’s strong response, could escalate tensions. “Trump may have just tossed the threat out there, as he does,” Siller said. “But Mexico’s response, that we’re going to respond to you with tariffs, that will make Trump really impose them.”

Trump’s tariff plan targets trade and migration

In his Truth Social posts, Trump reiterated his intent to impose sweeping tariffs on imports from Mexico and Canada as well as a 10% tariff on Chinese goods. He linked the proposed duties to his demands for stricter border controls and a crackdown on fentanyl trafficking.

“Both Mexico and Canada have the absolute right and power to easily solve this long-simmering problem,” Trump wrote, adding that the tariffs would remain until these nations address the issues.

Dialogue remains the best path forward

Despite the sharp rhetoric, Sheinbaum left the door open for negotiations, emphasizing that dialogue is essential to maintaining peace and prosperity between the two nations. “I hope our teams can meet soon,” she said.