Investors worry a trade fight could tip Mexico’s economy into recession.
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Also worrisome for Mexico is Trump’s proposal to deport some 11 million undocumented workers from the U.S.as well as his controversial plan to tax a portion of USA remittances sent to Mexico if the Mexican government does not agree to pay for his multibillion-dollar border wall proposal.
Worldwide money, it seems, is secure in the knowledge that the USA economy is actually stronger and more powerful than any politician, and believes that in this case what we heard during this remarkable and contentious campaign should not be taken literally.
“If you take Trump’s policies at face value, they are favorable for economic growth and inflation”, said David Lefkowitz, senior equity strategist at UBS Wealth Management Americas in NY.
Connor Campbell, a trader at Spreadex, says “a surprisingly “presidential” Trump victory speech. seems to have reassured investors”.
Investors also recalled that the market’s dramatic decline after Britain voted in June to leave the European Union was short-lived and was ultimately seen as a buying opportunity.
But what would Trump’s proposed wall look like in reality?
Two-way trade in goods totaled $531 billion in 2015, and 80 percent of Mexico’s exports goes to the United States.
Trump’s platform included a 45% tariff on Chinese imports and 35% tariff on some Mexican imports, accusing the countries of exploiting their cheap labour at the expense of the U.S. Middle Class. Guatieri noted that confrontations with both countries could occur early and quickly.
Though uncertainty remains over Trump’s trade, immigration and geopolitical policies and what his victory means for the future of globalization, investors appeared somewhat calmed by his victory speech, in which he praised Clinton and urged Americans to “come together as one united people” after a divisive campaign.
NAFTA has been a cornerstone of Mexican economic policy since it took effect in 1994.
But Finance Minister Jose Antonio Meade said there was no need for what he called “premature actions”, as trade is not yet being impacted by the election.
“Because of the uncertainty of what Trump could do, consumers will postpone purchases, companies will postpone investments”, Casillas said but added that he thought Trump’s actual policies will fall short of his rhetoric, not least because unwinding trade with Mexico is easier said than done.
But, she stressed, “paying for a wall is not part of our vision”.
Trump’s strong talk on trade also has left many in Asia deeply anxious.
About 30% of Mexico’s economy consists of its exports, and nearly all of that are sent across the border.
Some Mexicans whose livelihoods are linked to the trade ties between the two countries also expressed hope that Trump’s bark would be worse than his bite.
“We’re seeing that play out right now and I suspect if you see a Trump win we’d be seeing a continuation of something like that”. “It’s true he was very aggressive, very tough, but sometimes people have to act that way to reach positions requiring charisma”.
The three major US stock indexes rose as investors piled in to financial and healthcare stocks on hopes for less onerous regulations in those sectors than they had feared from a Hillary Clinton presidency.
Mexico has more than $175 billion in foreign reserves, and Carstens said last month he would consider using a $90 billion International Monetary Fund flexible credit line “in the event of an external shock”.
While Fed Chief Janet Yellen has insisted in recent months any decision on rates will be made independent of politics and completely reliant on US economic data, she has clearly communicated financial-market volatility is factored into the decision equation.
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Trump’s campaign tapped frustration among American workers who feel hurt by globalization and the loss of well-paid manufacturing jobs.
