Latin American currencies face significant risks if Donald Trump follows through on his campaign pledges.
According to an analysis by Citi Bank, the Mexican peso is projected to decline by at least 5% against the US dollar, dropping from MXN$20.8 in 2024 to approximately MXN$21 by the end of 2025.
The currencies of other nations, including Brazil, Chile, Argentina, and Colombia, are also anticipated to experience downward pressure.
Trump has vowed to impose a 25% tariff on goods imported from Canada and Mexico unless these countries take stronger measures to curb illegal immigration into the United States.
However, the report suggests that if Trump adopts a more pragmatic or negotiated approach, the impact on currencies could be less severe.
Bloomberg cites Citi economist Ernesto Revilla, who noted in the analysis that even partial mass deportations of undocumented workers could exert upward pressure on wages in certain sectors of the US economy, leading to inflationary effects.
This potential inflation, combined with other economic policies, could have global ramifications.
Historically, the US dollar surged by 5% against a basket of international currencies following Trump’s first election victory in 2016. Conversely, the dollar’s value declined significantly after his 2020 election loss.
Trump’s proposed policy measures are expected to fuel inflation in the United States, which could prompt the Federal Reserve to raise interest rates.
Higher interest rates would likely attract global investors to US Treasury bonds, regarded as one of the safest investments. This shift of capital towards the US could further weaken currencies in other regions, including Latin America.
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