Trump's tariffs: Latin America's rejection & global response
by Ion Jauregui - ActivTrades Analyst
Toughening immigration policies and their effect on the U.S. economy.
Since coming to power, Donald Trump has implemented policies that have negatively affected Latin American immigrants in the United States. The tightening of immigration laws, the elimination of protection programs and mass deportations have led to an exodus of workers who previously held key positions in key sectors of the U.S. economy. The construction of the border wall, the reinforcement of immigration patrols and restrictions on asylum applications have made it even more difficult for Latin American migrants to arrive and stay.
The economic impact of these decisions has been significant. Many vacancies in construction, agriculture and hospitality, traditionally occupied by immigrants, have gone unfilled. This has generated productivity problems and has forced companies to look for alternatives, such as wage increases or task automation, to compensate for the lack of workers.
Canada and Mexico hit back with tariffs
Internationally, Trump's protectionist measures have generated a strong backlash. The imposition of tariffs on countries such as Mexico and Canada has triggered an adverse response: both countries have announced trade retaliation against the United States. Mexico has increased tariffs on key U.S. export products, such as steel and agricultural products, affecting the economy of the states producing these goods. Canada has taken similar measures, increasing tariff rates in strategic sectors.
These trade conflicts have weakened relations between these countries and have prompted Mexico and Canada to diversify their markets, reducing their dependence on the U.S. and strengthening cooperation with other trading blocs.
Colombia and its accession to the BRICS
In this context, Colombia has made a strategic decision to join the BRICS bloc, aligning itself with emerging economies such as China, Russia, Brazil, India and South Africa. This decision responds in part to the need to seek new trade allies in the face of the uncertainty generated by Trump's policies. In addition, Colombia seeks to benefit from new investment and financing opportunities from the BRICS, in an effort to reduce its dependence on U.S. markets.
Colombia's accession to this bloc marks a shift in Latin American geopolitics, where several countries are exploring alternatives to Washington's influence. The growing presence of China and Russia in the region reinforces this trend, offering financing and trade agreements that are attractive to many Latin American nations.
U.S. isolationism
The result of these policies has been a growing isolation of the United States in the region. Latin America, as a bloc, has shown a resounding rejection of the Trump administration, which has not only deteriorated diplomatic relations, but has also generated a deep distrust in its leadership. This rejection has spread to several European countries, where the perception of Trump as an unreliable and even con artist leader has been growing. The US withdrawal from key international agreements, such as the Paris Agreement on climate change and the Trans-Pacific Partnership, has exacerbated these tensions and weakened the country's credibility on the global stage.
Internal divisions in the Republican Party
Even within his own country, a portion of his traditional Republican constituency has begun to distance itself. Many conservatives do not see his policies as representative of classic Republican values, but rather as a manifestation of the MAGA (Make America Great Again) movement, which has evolved into an increasingly radicalized stance. The MAGA movement has redefined the Republican agenda during since Trump's attempt to regain his position in the presidency after Biden's Democratic victory and continued during his last campaign that led to his electoral victory, focusing on economic nationalism, protectionism and an anti-immigrant rhetoric that has generated friction within the party itself. Influential Republican figures have expressed concern about the direction the party has taken under Trump's influence, which could affect its long-term electoral viability.
Impact on currencies: EUR/USD, USD/CAD and USD/MXN.
Trump's policies have had a considerable effect on currency markets, generating volatility and sharp movements in the currency pairs most exposed to his decisions.
- EUR/USD: The uncertainty generated by Trump's protectionist policies, coupled with the trade war with China and the global slowdown, has led the dollar to experience ups and downs against the euro. In times of stress, investors have traditionally sought refuge in the dollar, strengthening it against the euro, this has been noticeable after the presidential candidate's victory and prior to his official appointment. However, as the implementation of measures that weaken confidence in the U.S. economy has begun, the euro could regain ground despite its palpable weakness. There is a growing consensus on the need for further rate cuts by the ECB, suggesting that Christine Lagarde will soon cut 25 basis points this week and the rate-cutting cycle will be extended. Although the impact of US policies is not predictable in the short term, the ECB intends to play the cards it has in hand to try to ease tensions. A Europe trying to negotiate with Mercosur and seeking to remedy Europe's growing tensions in anticipation of growth doubts and rising inflation risk may indicate that it could miss the ECB's targets set since December. This will bring the deposit rate from 3% to 2.75% this week. Markets have already discounted this figure and analysts' consensus seems overwhelming. Purchasing managers' indices (PMI) have shown slight improvements especially in Germany, although without leaving a picture of general eurozone weakness. Now the biggest challenge for the ECB seems to be that all monetary policy decisions are being made in the shadow of the head of the White House. The Euro has been moving in a range between 1.048 and 1.017 with its current price at $1.031, one of the lowest prices since September 2024 where it was trading at 1.12 very marked correction by US strength and European devolvement. Currently the Euro seems to be trying to hold its lows position as support, we will have to see if European policies and the economic rise will prevent the currency from continuing its path to the Eurodollar parity.
- USD/CAD: Trade tensions with Canada, stemming from tariffs and the renegotiation of the T-MEC (USMCA), have influenced the volatility of this pair. The Canadian economy, highly dependent on trade with the US, has been negatively impacted, weakening the Canadian dollar at certain periods. However, the resilience of the Canadian energy sector and agreements with other trading partners have allowed the CAD to recover on several occasions. The Bank of Canada's monetary policy has been to reduce its interest rate by 25 basis points to 3%, on the basis that inflation is around the 2% target. These actions reflect an expansionary monetary policy aimed at stimulating the Canadian economy by reducing the cost of credit and encouraging investment and consumption. The Bank of Canada has indicated that it will continue to closely monitor economic conditions and inflation developments to determine future monetary policy adjustments. Since December 19, the Canadian dollar had sustained trading in a range between 1,443 and 1,448, which was pierced yesterday. To new highs of 1.479 Canadian dollars per US dollar. This movement has been in anticipation of the possible trade slowdown that may occur at the US borders and in addition to the US PMI production data (51.2) which yesterday was better than the previous month (50.1) versus the Canadian (51.6) which was worse than the previous month (52.3).
- USD/MXN: The US-Mexico relationship has been one of the most affected by Trump's policies. Anti-immigrant rhetoric, the threat of tariffs and the renegotiation of the T-MEC have generated constant fluctuations in the Mexican peso. In times of stress, the USD/MXN has shown strong dollar appreciation, reflecting the uncertainty in the markets. However, Mexico's trade diversification and its strengthening in other blocs have allowed the currency to stabilize in the medium term. The economic policy of the Bank of Mexico (Banxico) aims to adjust its inflation by making gradual rate adjustments. For example, in September 2024, the rate was reduced by 25 points to around 10.50%. Annual inflation stood at 4.21% in December according to the National Institute of Statistics and Geography (INEGI). In order to face global volatility, Mexico took the initiative to accumulate its international reserves exceeding 228 billion dollars in January 2025. If we take IMF data from 2024 Mexico is in a situation of economic and financial stability in the face of negative external shocks, and being that the IMF considers a level of 100 to 150% in its ARA indicator, Mexico accumulated 117.1% in 2023, so this increase only improves its level of international solvency. While it is true that in 2021 (4.63%) the interest rate was at its lowest since 2015 (3.32%), the increase in inflation since the pandemic period has been correcting from 11.4% in 2023 to the current value. A -1.15% inflation compared to two years ago. On the other hand, looking at the currency and its behavior, since September 2024 the value of the dollar has been gaining strength and its growth range has widened, gradually devaluing the peso. Up to yesterday's high of 1.479. The range in which it had been since the second half of December between 1.428 and 1.448 has been forcefully pierced yesterday. As we have said quite possibly due to the US strength data.
Conclusion: A legacy of uncertainty and rejection.
Trump's legacy in international politics continues to be debated. However, it is undeniable that his decisions have provoked a unified reaction of rejection in Latin America and many other parts of the world. While some sectors of the U.S. economy have experienced short-term benefits from his protectionist policies, the long-term impact could translate into a loss of global influence and reduced competitiveness in international markets.
The United States now faces the challenge of rebuilding its relations with its traditional allies and redefining its role on the global stage. Mexico and Canada have taken a “wait and see” approach, although some countries such as Colombia and Honduras have already begun to make decisions against the U.S. In particular, Honduras was already making an issue of the amount of “allowances” being sent to the country to help families subsist and grow from the U.S., not the only country that relies heavily on legal or illegal immigrants making a living as best they can and sending capital back to their families.
There is no doubt that the inflationary war that Trump is generating with his tariffs, will affect Canada, Mexico, and of course the United States itself, as the main affected by this inflation. Europe and China will be in the second row. Mexico and Canada, seeing the rejection of the U.S. administration, could begin to look for local substitutes for their imports, and have begun to relabel products in supermarkets to differentiate national products from U.S. products and encourage local consumption. What is clear is that Trump's policies have left an imprint of uncertainty and polarization both domestically and internationally.
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
Toughening immigration policies and their effect on the U.S. economy.
Since coming to power, Donald Trump has implemented policies that have negatively affected Latin American immigrants in the United States. The tightening of immigration laws, the elimination of protection programs and mass deportations have led to an exodus of workers who previously held key positions in key sectors of the U.S. economy. The construction of the border wall, the reinforcement of immigration patrols and restrictions on asylum applications have made it even more difficult for Latin American migrants to arrive and stay.
The economic impact of these decisions has been significant. Many vacancies in construction, agriculture and hospitality, traditionally occupied by immigrants, have gone unfilled. This has generated productivity problems and has forced companies to look for alternatives, such as wage increases or task automation, to compensate for the lack of workers.
Canada and Mexico hit back with tariffs
Internationally, Trump's protectionist measures have generated a strong backlash. The imposition of tariffs on countries such as Mexico and Canada has triggered an adverse response: both countries have announced trade retaliation against the United States. Mexico has increased tariffs on key U.S. export products, such as steel and agricultural products, affecting the economy of the states producing these goods. Canada has taken similar measures, increasing tariff rates in strategic sectors.
These trade conflicts have weakened relations between these countries and have prompted Mexico and Canada to diversify their markets, reducing their dependence on the U.S. and strengthening cooperation with other trading blocs.
Colombia and its accession to the BRICS
In this context, Colombia has made a strategic decision to join the BRICS bloc, aligning itself with emerging economies such as China, Russia, Brazil, India and South Africa. This decision responds in part to the need to seek new trade allies in the face of the uncertainty generated by Trump's policies. In addition, Colombia seeks to benefit from new investment and financing opportunities from the BRICS, in an effort to reduce its dependence on U.S. markets.
Colombia's accession to this bloc marks a shift in Latin American geopolitics, where several countries are exploring alternatives to Washington's influence. The growing presence of China and Russia in the region reinforces this trend, offering financing and trade agreements that are attractive to many Latin American nations.
U.S. isolationism
The result of these policies has been a growing isolation of the United States in the region. Latin America, as a bloc, has shown a resounding rejection of the Trump administration, which has not only deteriorated diplomatic relations, but has also generated a deep distrust in its leadership. This rejection has spread to several European countries, where the perception of Trump as an unreliable and even con artist leader has been growing. The US withdrawal from key international agreements, such as the Paris Agreement on climate change and the Trans-Pacific Partnership, has exacerbated these tensions and weakened the country's credibility on the global stage.
Internal divisions in the Republican Party
Even within his own country, a portion of his traditional Republican constituency has begun to distance itself. Many conservatives do not see his policies as representative of classic Republican values, but rather as a manifestation of the MAGA (Make America Great Again) movement, which has evolved into an increasingly radicalized stance. The MAGA movement has redefined the Republican agenda during since Trump's attempt to regain his position in the presidency after Biden's Democratic victory and continued during his last campaign that led to his electoral victory, focusing on economic nationalism, protectionism and an anti-immigrant rhetoric that has generated friction within the party itself. Influential Republican figures have expressed concern about the direction the party has taken under Trump's influence, which could affect its long-term electoral viability.
Impact on currencies: EUR/USD, USD/CAD and USD/MXN.
Trump's policies have had a considerable effect on currency markets, generating volatility and sharp movements in the currency pairs most exposed to his decisions.
- EUR/USD: The uncertainty generated by Trump's protectionist policies, coupled with the trade war with China and the global slowdown, has led the dollar to experience ups and downs against the euro. In times of stress, investors have traditionally sought refuge in the dollar, strengthening it against the euro, this has been noticeable after the presidential candidate's victory and prior to his official appointment. However, as the implementation of measures that weaken confidence in the U.S. economy has begun, the euro could regain ground despite its palpable weakness. There is a growing consensus on the need for further rate cuts by the ECB, suggesting that Christine Lagarde will soon cut 25 basis points this week and the rate-cutting cycle will be extended. Although the impact of US policies is not predictable in the short term, the ECB intends to play the cards it has in hand to try to ease tensions. A Europe trying to negotiate with Mercosur and seeking to remedy Europe's growing tensions in anticipation of growth doubts and rising inflation risk may indicate that it could miss the ECB's targets set since December. This will bring the deposit rate from 3% to 2.75% this week. Markets have already discounted this figure and analysts' consensus seems overwhelming. Purchasing managers' indices (PMI) have shown slight improvements especially in Germany, although without leaving a picture of general eurozone weakness. Now the biggest challenge for the ECB seems to be that all monetary policy decisions are being made in the shadow of the head of the White House. The Euro has been moving in a range between 1.048 and 1.017 with its current price at $1.031, one of the lowest prices since September 2024 where it was trading at 1.12 very marked correction by US strength and European devolvement. Currently the Euro seems to be trying to hold its lows position as support, we will have to see if European policies and the economic rise will prevent the currency from continuing its path to the Eurodollar parity.
- USD/CAD: Trade tensions with Canada, stemming from tariffs and the renegotiation of the T-MEC (USMCA), have influenced the volatility of this pair. The Canadian economy, highly dependent on trade with the US, has been negatively impacted, weakening the Canadian dollar at certain periods. However, the resilience of the Canadian energy sector and agreements with other trading partners have allowed the CAD to recover on several occasions. The Bank of Canada's monetary policy has been to reduce its interest rate by 25 basis points to 3%, on the basis that inflation is around the 2% target. These actions reflect an expansionary monetary policy aimed at stimulating the Canadian economy by reducing the cost of credit and encouraging investment and consumption. The Bank of Canada has indicated that it will continue to closely monitor economic conditions and inflation developments to determine future monetary policy adjustments. Since December 19, the Canadian dollar had sustained trading in a range between 1,443 and 1,448, which was pierced yesterday. To new highs of 1.479 Canadian dollars per US dollar. This movement has been in anticipation of the possible trade slowdown that may occur at the US borders and in addition to the US PMI production data (51.2) which yesterday was better than the previous month (50.1) versus the Canadian (51.6) which was worse than the previous month (52.3).
- USD/MXN: The US-Mexico relationship has been one of the most affected by Trump's policies. Anti-immigrant rhetoric, the threat of tariffs and the renegotiation of the T-MEC have generated constant fluctuations in the Mexican peso. In times of stress, the USD/MXN has shown strong dollar appreciation, reflecting the uncertainty in the markets. However, Mexico's trade diversification and its strengthening in other blocs have allowed the currency to stabilize in the medium term. The economic policy of the Bank of Mexico (Banxico) aims to adjust its inflation by making gradual rate adjustments. For example, in September 2024, the rate was reduced by 25 points to around 10.50%. Annual inflation stood at 4.21% in December according to the National Institute of Statistics and Geography (INEGI). In order to face global volatility, Mexico took the initiative to accumulate its international reserves exceeding 228 billion dollars in January 2025. If we take IMF data from 2024 Mexico is in a situation of economic and financial stability in the face of negative external shocks, and being that the IMF considers a level of 100 to 150% in its ARA indicator, Mexico accumulated 117.1% in 2023, so this increase only improves its level of international solvency. While it is true that in 2021 (4.63%) the interest rate was at its lowest since 2015 (3.32%), the increase in inflation since the pandemic period has been correcting from 11.4% in 2023 to the current value. A -1.15% inflation compared to two years ago. On the other hand, looking at the currency and its behavior, since September 2024 the value of the dollar has been gaining strength and its growth range has widened, gradually devaluing the peso. Up to yesterday's high of 1.479. The range in which it had been since the second half of December between 1.428 and 1.448 has been forcefully pierced yesterday. As we have said quite possibly due to the US strength data.
Conclusion: A legacy of uncertainty and rejection.
Trump's legacy in international politics continues to be debated. However, it is undeniable that his decisions have provoked a unified reaction of rejection in Latin America and many other parts of the world. While some sectors of the U.S. economy have experienced short-term benefits from his protectionist policies, the long-term impact could translate into a loss of global influence and reduced competitiveness in international markets.
The United States now faces the challenge of rebuilding its relations with its traditional allies and redefining its role on the global stage. Mexico and Canada have taken a “wait and see” approach, although some countries such as Colombia and Honduras have already begun to make decisions against the U.S. In particular, Honduras was already making an issue of the amount of “allowances” being sent to the country to help families subsist and grow from the U.S., not the only country that relies heavily on legal or illegal immigrants making a living as best they can and sending capital back to their families.
There is no doubt that the inflationary war that Trump is generating with his tariffs, will affect Canada, Mexico, and of course the United States itself, as the main affected by this inflation. Europe and China will be in the second row. Mexico and Canada, seeing the rejection of the U.S. administration, could begin to look for local substitutes for their imports, and have begun to relabel products in supermarkets to differentiate national products from U.S. products and encourage local consumption. What is clear is that Trump's policies have left an imprint of uncertainty and polarization both domestically and internationally.
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.