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Mexico Slaps U.S. With $2.4 Billion Tariffs on 90 Products

Mexico slapped the United States with $2.4 billion worth of tariffs on 90 unnamed industrial and agricultural products. The move comes in retaliation after the U.S. Congress cancelled a pilot program that would allow a handful of Mexican truckers to deliver goods throughout the U.S.

According to Gerardo Ruiz Mateos, Mexico’s Economy Minister, the tariffs are allowed under the 1994 North American Free Trade Agreement (NAFTA). “We consider this action by the United States to be wrong, protectionist and clearly in violation of the treaty,” Ruiz Mateos added.

Mexico’s actions might be coming at one of the worst times in the U.S.’ economic history. In January, exports from the U.S. to the world fell 12.5% from the month prior. Since August the figure has plummeted 33.45%. To Mexico alone, that figure has fallen to levels last seen in Jul. 2005 or by 34% since August.

U.S.’ southern neighbor might be hurting itself too. Mexico’s Peso has tanked after hitting a 6-year high against the U.S. Dollar of 9.85 on Aug. 04th. It reached an all-time low only three days ago of 15.58. Such a violent change in price will make it more expensive for Mexicans to purchase goods produced north of its border. But with the enactment of such tariffs, the inflationary pressure felt from Peso weakness will only be exacerbated. Thus the new trade policy may actually prove to hurt Mexico as much as it does the United States.

– LG

UPDATE: Mexican, U.S. Officials to Discuss Trucking Dispute


Filed under: Global Economics, World, , , , , , , , , , , , ,

Mexico’s Bank Chief Ortiz Ensures Peso Intervention (A Long Rant on Mexico’s Economy)

The Mexican Peso Has Lost 30% Against The U.S. Dollar Since August

The Mexican Peso Has Lost 30% Against The U.S. Dollar Since August

In a speech given yesterday, Guillermo Ortiz, Governor of the Bank of Mexico (BANXICO), promised that he would defend the Peso for the “foreseeable future.” The expectation-anchoring announcement came after the Mexican currency tumbled 30% against the U.S. Dollar – over the previous six months. Indeed, the currency has become Latin America’s worst-performing one over the said period. At the Peso’s low, Feb. 4th, the greenback could purchase 14.70 units of the Mexican currency…a stark contrast from it’s 6-year high, Aug. 04th, 2008, of 9.85 units.

In a speech given minutes ago, Mexico’s Deputy Finance Alejandro Werner stated that the 110 million-person nation could see the economy shrink by as much as 1.0% in 2009. This estimate seems overly optimistic considering the fact that his nation’s exports have been significantly sliding since October. December and November alone saw the metric decline by 19.7% and 16.1%, respectively. Beyond this fundamental-based skepticism, Governor Ortiz added that forecasting in this environment is “very difficult.”

“A little late in the game” seems to be the theme surrounding BANXICO’s delayed reaction to the U.S.’ credit crisis. While most of the G7 central banks slashed rates, Ortiz raised them – from 7.50 to 8.25% over a three month period between May and August of 2008. It was not until January’s meeting that the monetary authorities nipped the rate by 50bp – a small move compared to the three digit point slices being slashed off the overnight rate in many countries like New Zealand and the UK.

Overall, with 85% of Mexico’s exports headed towards it’s northern neighbor and U.S. demand for goods deteriorating drastically the Mexican economy will probably recede by more than 1.0%. With growth slowing, the BANXICO will likely slash rates further. If indeed the prolonged global recession deepens, Mexico may have to adopt a near-zero interest rate policy that will surely cost them any strength remaining in the Peso’s shadows. As such, Ortiz’ defense of the currency will cost his country it’s much needed foreign reserves. – LG

Filed under: Economics, World, , , , , , , ,



April 2019
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