Trump Revives the Tariff War With a Blanket 10% Levy: The Potential Blow to Mexico and the USMCA
The new across-the-board U.S. tariff increases uncertainty for Mexican exporters and could put pressure on prices, investment, and the exchange rate.
U.S. President Donald Trump announced the imposition of a new blanket 10% tariff on all imports, after the U.S. Supreme Court narrowed the use of executive authority to impose broad-based levies under the International Emergency Economic Powers Act (IEEPA). In response, the White House said it will look for other legal pathways—including the 1974 trade framework—to sustain the tariff policy, a move that once again puts the global economy on highly volatile ground.
For Mexico, the announcement revives a risk that had eased in recent months: a more uncertain trade environment with its main partner. The Mexican economy is structurally dependent on the U.S. market: a significant share of its manufactured exports—especially cars and auto parts, electronics, electrical equipment, machinery, and medical devices—feeds into regional supply chains where tariff changes quickly reshape costs, inventories, and production decisions.
The U.S. court ruling set limits on a key tool Trump used to justify sweeping tariffs, but the new announcement suggests the strategy is not being abandoned—it is shifting its legal basis. That adds another layer for companies with cross-border operations, which now must track not only trade policy but also U.S. litigation and the legislative calendar that could determine how long the levies last and how broadly they apply.
In the short term, the impact on Mexico will depend on whether the tariff is applied without exemptions, how regional trade is treated under the USMCA, and whether additional sector-specific measures follow (for example, on autos, steel, or aluminum). Although the ruling focused on broadly presented “reciprocal” tariffs, it left room for industry-specific policies to continue—an especially critical point for Mexican manufacturing.
Markets often react to both the tariff and the uncertainty: a generalized scheme can raise import costs in the United States, hit final demand, and squeeze margins for companies that rely on cross-border inputs. For Mexico, that can translate into weaker export momentum and, as a result, slower growth—particularly in regions tightly tied to export manufacturing in the North and the Bajío.
Pressure on Investment, the Exchange Rate, and Costs: How It Filters Through to the Mexican Economy
The most immediate channel for Mexico is not always the tariff itself, but the combination of reduced visibility and shifting expectations. If companies anticipate that access to the U.S. market will be more expensive or more erratic, they may delay investment decisions, reconfigure suppliers, or seek hedges that raise operating costs. In a country that has benefited from “nearshoring” thanks to its proximity to the United States, a protectionist turn tends to slow the pace of new announcements and expansions, even as Mexico retains logistical and cost advantages versus Asia.
On the financial front, a flare-up in trade tensions can show up as greater volatility of the Mexican peso against the U.S. dollar, especially if risk aversion rises and safe-haven assets strengthen. The exchange-rate path also depends on the interest-rate differential and perceptions of Mexico’s fiscal and external strength, but trade shocks with the United States are often amplified by the outsized role that market plays in exports and remittances.
In addition, if the blanket tariff pushes prices higher in the United States, the effects could be mixed: on the one hand, inflationary pressure on U.S. consumers; on the other, a potential cooling of demand if purchasing power falls. For Mexico, the combination is delicate: weaker U.S. demand can hurt exports, while pricier imported inputs and logistical adjustments can feed into costs for Mexican industries integrated into North American supply chains.
From a monetary-policy perspective, a more uncertain external environment tends to make Banco de México more cautious in its calibration. If exchange-rate volatility intensifies or certain tradable prices pick up, the central bank could face a tougher trade-off between locking in disinflation and preventing a deterioration in expectations. At the margin, the signal from the Federal Reserve will also matter: if the United States faces price pressures due to tariffs, the rate path may not ease as quickly as markets expect, with implications for flows into emerging markets.
On the political and trade front, Mexico could trigger consultations and dispute-settlement mechanisms under the USMCA if it believes the tariff violates commitments, though timelines are often lengthy. In parallel, business groups would push to preserve clear rules of origin and preferential treatment for regional goods, since the value of integration depends precisely on predictability.
Even with these risks, Mexico retains buffers: an export base diversified across industries, a financial system under prudent regulation, and a domestic market that, while uneven, has shown an ability to sustain consumption in certain periods. Still, the room to maneuver is smaller when the shock comes from the country’s main trading partner and when private investment is heavily conditioned on stable access to the U.S. market.
In sum, the blanket 10% tariff announced by Trump reintroduces a flashpoint that could ripple through Mexico via exports, investment, and financial volatility. The final magnitude will depend on the design, possible exemptions under the USMCA, and the legal and political durability of the scheme, but the episode confirms that trade risk will remain a key variable for Mexico’s economic outlook in 2026.
