FX.co ★ IPC Pressured by US Tariffs

In July, the S&P/BMV IPC dropped below the 56,400 level, influenced by President Trump's announcement of a potential 30% tariff on Mexican imports. This development, along with the possibility of extending these tariffs to the European Union and other trading partners, impacted sectors sensitive to exports. In his communication with President Claudia Sheinbaum, Trump justified these tariffs as a measure to combat fentanyl trafficking, echoing a rationale he has previously used for similar actions. This heightened risk aversion, considering that more than 80% of Mexico's exports are destined for the United States. President Sheinbaum acted promptly to calm the markets, expressing her confidence in achieving a negotiated resolution before the tariffs are implemented, while also emphasizing the importance of respecting Mexican sovereignty. Domestically, the recent minutes from the Bank of Mexico indicate that following a cumulative rate cut of 325 basis points since early 2024, the policymakers now see limited room for further significant reductions. Instead, they favor smaller, precautionary quarter-point adjustments as inflation continues to exceed the target.