Trump comes with renegotiation of the T-MEC and turbulence for the peso; remittances, safe

From review to renegotiation

With Donald Trump in the presidency of the United States, the fear is more present that the review of the T-MEC in 2026 will become a renegotiation, a possibility that the Republican has put on the table.

Mexico’s greatest challenge is the continuity of this treaty with the United States and Canada, because thanks to it the country’s economy has been consolidated, explained Verónica Ortiz, lawyer and political analyst.

“The strategy is missing, not trusting ourselves, not thinking that because Donald Trump renegotiated the North American Free Trade Agreement (NAFTA) and signed the T-MEC that he will give unconditional support, betting on that or simply betting on geographical proximity or because we have become the main commercial partner; I mean, all that is true, but we already know what Trump is like, he prefers bilateral agreements,” commented the former director of the Mexican Council of International Affairs (Comexi).

He said that Mexico has disadvantages in the face of the review: a panel on energy and transgenic corn, in addition to a judicial reform that has caused uncertainty and the intention to disappear some autonomous bodies.

A renegotiation would be the worst scenario, since it puts Mexico in a cycle of uncertainty, “it would further slow down investments that in themselves are not arriving in the way and at the time they should,” Ortiz considered.

The reality is that it is not going to be a review, it is going to be a “complete renegotiation,” said Jorge Schiavon, an academic at Ibero and an expert on relations between Mexico and the United States.

This is related to the struggle between the US and China, fundamentally on technological and commercial issues, issues in which the support and accompaniment of Mexico and Canada is required so that the Asian country does not use, for example, Mexican territory to make investments. and from here penetrate the market of the neighboring country.

“Within this renegotiation, there will surely be increasing levels of restrictions on foreign direct investment from a non-market economy, that is, from China, so that they have free transit of their goods and production in North America,” Schiavon highlighted.

Tariffs = turbulence for the peso

Something that is also planned for the Trump administration is that it will continue to use tariffs as a bargaining chip to achieve its objectives of stopping migration and security, which represents threats to the Mexican peso against the dollar.

During his campaign, the Republican threatened on several occasions with the issue of tariffs, the last one was 25% on Mexico in principle, but they can reach up to 75%.

“Very likely the imposition of tariffs will raise prices on the United States side or worse, it seems to me for Mexico, that in the end, through a depreciation or devaluation of the peso, we are absorbing those tariffs so as not to pass them on to the final consumer,” said Ortiz. .

The market specialists hope that the peso will have a break, while Trump takes the presidency in January 2025, and that as he takes power and makes his threats a reality or not, variations in the exchange rate will be seen.

“We believe that this volatility will continue” in the exchange rate to the extent that the next president of the United States follows through on threats to impose tariffs on Mexican imports. We do not see that volatility beyond 21 pesos per dollar,” anticipated Daniela Cervantes, CEO of Golden Capital.

Regarding the threats of imposing tariffs, if Mexico does not control security and migration issues, it would go against the spirit of the T-MEC, but the country will have to find policies that retaliate against these tariffs. .

“This would once again imply the professional action of the Mexican government from the diplomatic side, from the administrative side of the Ministry of Economy and very particularly from the Undersecretary of International Trade, which in the previous administration was practically dismantled overnight. My concern is gigantic in the sense of: do we really have the capabilities to face the challenge that the administration of a president like Trump entails?” Schiavon indicated.