Mexico’s Markets in Turmoil as Trump Unveils Tariffs on Tuesday

U.S. President Donald Trump reaffirmed his decision to implement a 25% tariff on all imports from Mexico during a press conference on Monday. This announcement effectively terminated a prior agreement that had postponed the tariffs for a month.

“The tariffs are all set. They go into effect tomorrow,” Trump stated from the West Wing, leading to a significant decline in the Dow Jones Industrial Average, which fell nearly 800 points on the same day.

In response, Mexican President Claudia Sheinbaum urged for calm during her own press briefing. She noted that the tariff increase, initially planned for last month, was delayed due to prior discussions with the U.S. government.

Sheinbaum reiterated their commitment to tackle issues related to drug trafficking. “We have made the necessary agreements and coordination, but this decision ultimately lies with the United States government,” she said before Trump’s announcement.

In previous tariffs issued on February 11, Trump announced a 25% charge on steel and aluminum effective March 12. Mexico’s Secretary of Economy, Marcelo Ebrard, argued this violated the United States-Mexico-Canada Agreement (USMCA), which replaced the North American Free Trade Agreement on July 1, 2020, and will undergo review next year.

A temporary pact between Mexico and the U.S. was reached on February 3, delaying tariff increases in exchange for Mexico enhancing its security measures to curb drug trafficking. In return, the U.S. agreed to investigate its supply of firearms to Mexico.

Mexico adhered to this agreement by launching “Operation Frontera Norte” on February 5, deploying 10,000 military personnel to border regions. By February 27, the operation had resulted in the arrest of 914 individuals and the seizure of 896 firearms, along with 36,702 pounds of drugs.

“We aim to reduce the flow of fentanyl and other drugs into the United States while halting the influx of drugs and weapons from the U.S. to Mexico,” Sheinbaum emphasized during her address.

In a notable move to strengthen cooperation, Mexico transferred 29 cartel leaders to U.S. custody on February 27. Among those was Rafael Caro Quintero, accused of the 1985 kidnapping and murder of DEA agent Enrique “Kiki” Camarena in Guadalajara.

On Tuesday, the U.S. Supreme Court will hear arguments from the Mexican government, which is attempting to hold American gun manufacturers accountable for their role in violence caused by drug cartels in Mexico. They claim these companies knowingly sell firearms through illegal channels that enable distribution to cartel operatives.

The Mexican government’s brief asserts, “They embrace distribution practices they know enable these red-flag dealers to illegally sell to cartel traffickers. This constitutes classic aiding and abetting, in violation of federal law.”

Recent reports indicate that approximately half of all firearms recovered in Mexico between 2016 and 2022, where a source could be determined, were produced in the United States. An estimated 250,000 firearms are trafficked into Mexico annually, sourced from U.S. purchases.