US: 30% tariff imminent? Recession on the horizon?

An economic recession is looming in Mexico, analysts predict, as a result of the imminent implementation of a 30% tariff on Mexican exports to the United States.

This would be the effect that the already stagnant Mexican economy would feel.

The potential effects are multiple and all worrying.

This would lead to increased costs for Mexican exporters, a consequent reduction in exports, a negative impact on supply chains, inflationary pressure in Mexico due to the loss of export competitiveness, and an impact on the exchange rate, which would raise the cost of imported goods.

And if Mexico decides to respond with tariffs against the United States, trade tensions would increase and further affect bilateral trade.

This Friday, August 1, the 90-day extension under which most Mexican products exported to the United States were exempt from paying tariffs concludes. So far, President Claudia Sheinbaum's negotiating team, led by Economy Secretary Marcelo Ebrard, has not reached any agreement.

With four days remaining until the deadline, Mexican President Claudia Sheinbaum reiterated that there is still time to reach an agreement with the US.

The day before, over the weekend, U.S. Commerce Secretary Howard Lutnick said there would be no extensions or further grace periods for the announced tariffs to go into effect.

The 30% across-the-board tariff that President Donald Trump established is likely to go into effect.

It's worth remembering that the announcement of the new tariff was made by the US president, with a demand that has nothing to do with trade.

Although he has included the issue of combating fentanyl from the outset, the US president has focused his demands in recent weeks on openly and clearly confronting criminal organizations.

The 30% tariff he announced against Mexico came with both an acknowledgment and a warning. He acknowledged Mexico's progress in combating fentanyl. And, at the same time, he warned of the Mexican government's lack of will to confront the drug cartels.

The announcement was made by the US government just as the Mexican negotiating team was presented.

The Mexican government, that is, the Mexican delegation, found out precisely at that moment.

If the 30% tariff goes into effect, it will represent a further blow to the already weakened trilateral trade agreement, the United States-Mexico-Canada Agreement (USMCA), the modified version of NAFTA.

Mexican President Claudia Sheinbaum, after expressing confidence that an agreement would be reached, said last week: "I will seek out Trump if necessary."

As of today, July 29, we're three days away from the deadline, and either the Mexican president hasn't needed to contact him, or she hasn't been successful in getting a response from the U.S. president.

The previous forecasts, with the threat of a 25% tariff, were already very serious.

With the tariff increasing to 30%, greater negative impacts are expected.

The industrial sectors with the greatest contractions will be: automotive, mining, pharmaceutical, and electronics.

For the economy, the tariff impact could translate into recession, job losses, inflation, and depreciation of the peso.

Hopefully not. However, so far, it's still not clear that an agreement with the US can be reached. We'll see.

Glimpses

It's not official. It's a rumor.

Maricarmen Bonilla will be the new Undersecretary of Finance at the Ministry of Finance and Public Credit.

To date, Bonilla remains the head of the Public Credit and International Affairs Unit.

Rodrigo Mariscal, from Economic Planning, and Roberto Lazzeri, head of the Secretariat's Office, are still being considered for the position.

For now, rumors around the National Palace say that Bonilla could be the chosen one. We'll see.