Escalating trade tensions and potential tariffs are highlighting the fragile U.S.-Mexico relationship, particularly with Donald Trump’s possible return to power. His campaign threats of a 25% import tax on Mexico have caused the peso to plummet. In response, Mexican President Claudia Sheinbaum reassured that the economy thrives on mutual benefits. Analysts warn that tariffs could devastate Mexico’s export-driven economy. Immigration challenges will also complicate relations, with Trump likely seeking aggressive deportation policies.
Escalating trade tensions, increased tariffs, and the potential for mass deportations are once again spotlighting the delicate relationship between the United States and Mexico, particularly with Donald Trump’s anticipated return to the White House.
On the final day of his campaign, the Republican candidate set a dramatic precedent by threatening a 25% tax on Mexican imports unless officials take action against the influx of what he described as criminals and drugs crossing the border.
Analysts at Saxo Bank have pointed out that fears of impending tariffs have led to a significant decline in the value of the peso, which was trading at 20.60 to the dollar—its lowest point in two years.
In response, Mexico’s leftist president, Claudia Sheinbaum, sought to ease fears, stating that the country has “no reason for concern” following Trump’s threats.
Sheinbaum, a former mayor of Mexico City, emphasized the mutual benefits of the economic integration established under the USMCA, asserting, “We are not competitors; we complement one another.”
She also highlighted a 75% decrease in migration at the U.S.-Mexico border since December 2023, expressing hope for continued dialogue with the U.S. administration.
Navigating Complex Dialogues
The dynamics of dialogue between Donald Trump and Claudia Sheinbaum, a highly educated feminist and scientist, promise to be intricate. Sheinbaum has spent time studying in California, adding a layer of complexity to their interactions.
According to Pamela Starr, a specialist in U.S.-Mexico relations at the University of Southern California, “The challenge for Trump lies in the fact that Sheinbaum is not only a woman but a formidable and intelligent one, which is outside his comfort zone.”
Starr elaborates that Trump prefers to negotiate from a position of power, often resorting to aggressive rhetoric to create a strong negotiating stance. “I anticipate he will face a challenge from her, but she is resilient, and I believe she will respond equally strongly, compelling him to reach some form of agreement,” she concludes.
On the economic front, the potential imposition of a 25% tariff poses a serious threat to Mexico, where 80% of exports are directed to the United States. Gabriela Siller, the head of economic analysis at Banco BASE, warns that punitive tariffs could negatively impact exports, job creation, foreign investment, and overall economic growth, possibly leading to a downgrade in Mexico’s credit rating.
Confronting Migration Challenges
Pamela Starr reiterates that the migration issue will present a significant challenge for U.S.-Mexico relations, predicting Trump will seek to deport as many undocumented migrants as possible.
During his previous presidency, he had already resorted to tariffs as leverage to address immigration concerns, successfully prompting a high-level dialogue with Mexico.
Duncan Wood, president of the Pacific Council on International Policy, emphasizes the credibility of Trump’s threats, noting, “He is not an advocate for free trade and is likely to leverage these threats to compel Mexico to comply with his demands.”
Looking ahead, Trump might use the upcoming revision of the free trade agreement in 2026 as an opportunity to negotiate more favorable terms, indicating that trade relations may become increasingly strained.
Ramse Gutierrez, vice president at Franklin Templeton in Mexico, forecasts that a Republican victory could lead to a more aggressive negotiation approach, creating uncertainties that could influence both the exchange rate and inflation.
Despite these tensions, experts largely agree that Trump is unlikely to act on threats against Mexican cartels by deploying troops into Mexico, as such actions would face significant backlash. Duncan Wood underscores this point, stating, “Any ground actions in Mexico would likely be met with strong resistance.”