FX.co ★ Mexican Peso Drops After Trump’s Tariff Announcement

The Mexican peso depreciated to approximately 18.6 per USD following President Donald Trump's declaration to levy a 30% tariff on all Mexican goods starting August 1. In correspondence addressed to Mexican President Claudia Sheinbaum, Trump justified the imposition of these tariff barriers as a measure to halt the illicit importation of fentanyl into the United States, a rationale he has cited in previous tariff implementations targeting Mexico. This announcement has sparked concerns, considering that over 80% of Mexico's exports are directed towards the US market. Subsequently, President Sheinbaum expressed optimism on Saturday, stating her belief that a resolution could be reached before the tariffs are enacted. Domestically, the latest minutes from the Bank of Mexico's June policy meeting suggest a more cautious approach towards monetary easing. Despite a cumulative rate cut of 325 basis points since the beginning of 2024, the central bank's policymakers now advocate for smaller, quarter-point rate reductions, as headline inflation persists at an elevated level of 4.32%, significantly above the target rate of 3%.