Will Trump Lead US Into Trade War With Mexico? President Claudia Sheinbaum Rebukes Threats

Mexican President Claudia Sheinbaum offered a sharp rebuke of President-elect Donald Trump‘s tariff threats.

What Happened: According to Bloomberg. Sheinbaum has suggested that Mexico could respond to U.S. tariffs with a protectionist policy of its own.

"One tariff will be followed by another in response, and so on until we put common companies at risk," Sheinbaum said at a press conference. "The main exporters from Mexico to the US are General Motors GM, Stellantis STLA, and Ford Motor Company F, which arrived 80 years ago. Why put in place a tariff that puts them at risk?"

Why It Matters: Retaliatory action could put the two allied countries in a trade war.

Trump announced that he would put a 25% tariff against Mexico and Canada on his first day in office in retaliation for illegal border crossings into the U.S.

Trump also said it was in response to fentanyl trafficking. But the policy would hurt the Big Three automakers, which have roots in Detroit, Michigan.

The U.S.-based auto manufacturers have slumped in recent quarters; all three traded well in the red on Tuesday after Trump’s announcement. Tariffs on automobiles would likely leave Americans paying more for cars.

Mexican stocks also performed poorly on Tuesday; the iShares MSCI Mexico ETF EWW traded down over 3% following Trump’s announcement.

Trump ally Bill Ackman seemed to not take the President-elect at his word. The billionaire hedge fund manager suggested the tariffs are “a weapon” and won’t be implemented.

Trump did implement tariffs against China during his first term; the Tax Foundation later estimated that Americans incurred $80 billion in taxes from the tariffs.

Republican megadonor and Citadel CEO Ken Griffin has a less favorable view of Trump’s policy, calling tariffs a “slippery slope” that will hurt U.S. companies.

Most economists say tariffs are regressive taxes that disproportionately hurt poor Americans while stifling economic growth. Trump’s adoption of pro-tariff policies is a stark contrast to the free trade policies championed by Republican President Ronald Reagan during the 1980s.

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