Tariff turmoil engulfs Mexico despite latest respite

US President Donald Trump's decision to postpone some tariffs on imports from Mexico and Canada until April 2 was welcomed by the private sector as the move preserves the USMCA trade agreement but analysts warn that the frequent threats create uncertainty, impacting markets and investment expectations related to nearshoring.

"The chaos continues in Trump's tariff policy," James Salazar, deputy director of economic analysis at CI Banco, told BNamericas. Before the White House announced the postponement, President Claudia Sheinbaum had a fourth phone call with Trump to discuss the trade threats.

Salazar said the new extension was expected because imposing 25% tariffs on free trade partners did not make much sense. He highlighted that the key date will be April 2, when a study conducted by the Department of State concludes. The study focuses on US trade policy and reciprocal tariffs. The study will also review the automotive, semiconductor and pharmaceutical issues, among others.

"It seems that [Trump] removes us from this stigma of imposing tariffs due to the issues of fentanyl and migration and puts us in the basket with the whole world in what the United States considers fair to have excess tariffs," said Salazar.

But he also said that the trade agreement stipulates zero tariffs on US products.

"So, that may help to calm things down, although the uncertainty does not disappear and the financial markets will continue to be very attentive," he said. "Even March 12 is still pending with the tariffs on steel and aluminum, so it continues to be a relevant date."

Financial analyst Manuel Somoza told the Milenio TV channel on Friday that "the markets are not satisfied with the fact that deadlines and pauses are being given. The markets want certainty about what will happen and putting up with so many pauses and changes does not encourage the markets to improve substantially."

He added, "The truth is, [the markets] have been substantially affected by the hasty and irresponsible policies of Donald Trump."

Steel and aluminum

At a presidential conference on Friday, economy minister Marcelo Ebrard clarified that exports under the USMCA agreement are not subject to tariffs but that some companies, particularly in the automotive sector, use the "most favored nation" status under WTO rules, which will be subject to the tariffs. These exports represent 10-12% of Mexico's total.

Ebrard will meet with representatives of some of the affected companies to evaluate potential actions. At the same time, the authorities will work on the strategy for April and with US Trade Representative Jamieson Greer on the steel and aluminum tariffs set to take effect in the coming week.

"We also have the issue of steel and aluminum, we have to reach an agreement. Mexico imports more than the United States imports from Mexico, so we are in that discussion because there is no justification for having a tariff on aluminum and steel," Ebrard said.

FDI and nearshoring

Ebrard was confident that investments will continue to flow.

"Despite these issues of tariffs, [companies] will continue with investments in Mexico. We continue with the investments of the portfolio that had been worked on. There is trust and respect," said Ebrard, highlighting that so far US$217bn has been committed.

But Somoza expects foreign direct investment (FDI) to decline this year due to the lack of confidence.

"The lack of trust is not only with Mexicans, it is at an international level. Regardless of whether the pause has suited us, we are better off than yesterday, but it's not the decision we need. [Trump] has already done us a lot of damage. FDI has fallen enormously and you'll see that in 2025 we will not even reach half of what we achieved in 2024," Somoza said.

"Furthermore, nearshoring, which was once a great hope, on which the Plan México was based, for example, is now a dream. It seems increasingly far away. Who wants to come and get set up in Mexico with all the threats that Donald Trump has made against us, regardless of the tariffs?" he added, highlighting that Mexico has complied with all USMCA commitments, so a comprehensive solution is needed.

"This guy is simply making fun of us," he said.