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    Mexican President Mulls Retaliatory Tariffs After Trump’s Threats

    Mexico’s president, Claudia Sheinbaum, hit back on Tuesday morning at President-elect Trump’s vow to impose 25 percent tariffs on all products coming into the United States from Mexico, signaling that her country was prepared to respond with retaliatory tariffs of its own.Ms. Sheinbaum also said that raising tariffs would fail to curb illegal migration or the consumption of illicit drugs in the United States, an argument that Mr. Trump had made in his warning on tariffs.“The best path is dialogue,” Ms. Sheinbaum said at her daily news conference, calling for negotiations with the incoming Trump administration while laying out steps that Mexico has already taken to assuage some of Mr. Trump’s concerns.Ms. Sheinbaum, reading from a letter she is planning to send to Mr. Trump, noted that illegal crossings at the border between Mexico and the United States had plunged from December 2023 to November 2024, largely as a result of Mexico’s own efforts to stem migration flows within its own territory.“Migrant caravans no longer reach the border,” she added.Ms. Sheinbaum also called on U.S. authorities to do more to address the root causes of migration.“Allocating even a fraction of what the United States spends on warfare toward peace building and development would address the deeper drivers of migration,” Ms. Sheinbaum wrote in the letter.Ms. Sheinbaum also raised the specter of a broader tariff war that could inflict damage on the economies of both nations, pointing to multinational car manufacturers like General Motors, Stellantis and Ford Motor Co., which have operated in Mexico for decades.“Why endanger them with tariffs that would harm both nations?” Ms. Sheinbaum wrote. “Any tariffs imposed by one side would likely prompt retaliatory tariffs, leading to risks for joint enterprises.”Mexico is far more dependent on trade with the United States than vice versa, exporting about 80 percent of its goods to its northern neighbor.But numerous sectors in the United States, such as semiconductor and chemicals manufacturers, also rely on exporting to Mexico. Exports to Mexico accounted for nearly 16 percent of overall American exports in 2022.Ms. Sheinbaum also said that Mexico was already taking steps to combat the smuggling of fentanyl to the United States. But she argued that the core problem was demand for fentanyl within the United States, calling the crisis “fundamentally a public health and consumption issue within your society.”“It is widely known that the chemical precursors used to produce fentanyl and other synthetic drugs are illegally entering Canada, the United States, and Mexico from Asian countries,” Ms. Sheinbaum wrote. “This underscores the urgent need for international collaboration.” More

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    Oil producers warn Trump tariffs on Canada will push up US petrol prices

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    Trump’s proposed tariff increases would boost inflation by nearly 1%, Goldman Sachs estimates

    On Monday, Trump said on social media site Truth Social that he would impose an additional 10% tariff on goods from China and a 25% levy for Canada and Mexico.
    The three countries in question account for 43% of U.S. goods imports, and the tariffs would result in slightly less than $300 billion in revenue annually, according to Goldman Sachs calculations.
    It remains to be seen whether the tariffs will actually be implemented at the levels Trump proposed or what exceptions might be made.

    President-elect Donald Trump speaks at the U.S.-Mexico border on August 22, 2024 south of Sierra Vista, Arizona. 
    Rebecca Noble | Getty Images News | Getty Images

    The latest tariff proposal from President-elect Donald Trump would likely put upward pressure on inflation in the United States, according to Goldman Sachs.
    On Monday, Trump said on social media site Truth Social that he would impose an additional 10% tariff on goods from China and a 25% duty for Canada and Mexico. Goldman’s chief economist, Jan Hatzius, said in a note that the proposed levies would result in a notable increase for consumer prices in the U.S..

    “Using our rule of thumb that every 1 [percentage point] increase in the effective tariff rate would raise core PCE prices by 0.1%, we estimate that the proposed tariff increases would boost core PCE prices by 0.9% if implemented,” Hatzius said.
    “PCE” refers to the personal consumption expenditures price index, which is the preferred inflation reading of the Federal Reserve.
    A tariff-linked increase in core PCE could scramble the calculations around Fed rate cuts. The October PCE reading is due out Wednesday, and it’s expected to show a year-over-year increase of 2.8% for the core, according to economists surveyed by Dow Jones. In other words, inflation is still above the Fed’s target of 2%, and the tariffs could widen that gap.
    Traders have been dialing back their expectations for Fed rate cuts in 2025, though it is unclear how much of that is due to election results versus a resilient U.S. economy. Fed Chair Jerome Powell has said the central bank will consider the impact of tariffs and other fiscal policy changes on the direction of inflation once the details become clear.
    To be sure, it remains to be seen whether the tariffs will actually be implemented at the levels Trump proposed — or what exceptions might be made. The president-elect suggested in his social media post that the tariffs were conditional on changes to immigration policy and drug enforcement, specifically fentanyl. Some of Trump’s advisors and supporters have characterized the tariffs he proposed during the campaign as a bargaining position rather than a set policy.

    Hatzius, for his part, said it seems more likely that Canada and Mexico would avoid across-the-board tariffs than China.
    The three countries in question account for 43% of U.S. goods imports, and the tariffs would result in slightly less than $300 billion in revenue annually, according to Goldman Sachs calculations.

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    Mexico caught cold by threat of Trump trade war

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    Tariffs sound simple — and that’s what makes them so fiendish

    Standard DigitalStandard & FT Weekend Printwasnow HK$209 per 3 monthsThe new FT Digital Edition: today’s FT, cover to cover on any device. This subscription does not include access to ft.com or the FT App.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print editionWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisGlobal news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts10 monthly gift articles to shareGlobal news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print editionEverything in PrintWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisPlusEverything in Premium DigitalEverything in Standard DigitalGlobal news & analysisExpert opinionSpecial featuresFirstFT newsletterVideos & PodcastsFT App on Android & iOSFT Edit app10 gift articles per monthExclusive FT analysisPremium newslettersFT Digital Edition10 additional gift articles per monthMake and share highlightsFT WorkspaceMarkets data widgetSubscription ManagerWorkflow integrationsOccasional readers go freeVolume discountFT Weekend Print deliveryPlusEverything in Standard DigitalFT Weekend Print deliveryPlusEverything in Premium Digital More

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    Climate change is a global problem — it requires a global solution

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    Trump’s tariffs are a reality check for markets

    Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe froth quickly came off the market cheer that followed Donald Trump’s nomination of Scott Bessent, a Wall Street veteran, as US Treasury secretary on Friday. Late on Monday the president-elect pledged, via social media, day-one tariffs of 25 per cent on imports from Canada and Mexico, and an extra 10 per cent on China. His post damped hopes that, after a series of more unorthodox cabinet choices, Bessent might curb the zanier elements of Trump’s economic policy. It is a reminder to investors that regardless of who Trump picks to be around him, he will ultimately call the shots.That US stocks and Treasuries bounced following Bessent’s nomination is not surprising. The hedge fund manager is a pragmatic choice. He has decades of experience in financial markets, is well versed in global finance and economics, and is known to be a measured communicator. The other top contender for the role, Howard Lutnick — who was instead handed the commerce department — would not have gone down as well with investors. The CEO of financial services firm Cantor Fitzgerald is seen as brash, and an ardent backer of Trump’s tariff-raising agenda, which risks raising inflation and igniting trade wars.Bessent, by contrast, has been more ambiguous about the former president’s plans for import duties even while supporting his campaign. Last month he described sweeping tariffs as more of a negotiating tool than an inevitability. Investors are also hopeful that his market experience could help check Trump’s deficit-stretching fiscal agenda. In extremis, those tax and spending plans could add $15tn to America’s debt pile, and foment instability in the $27tn Treasury market.But Trump’s authoritarian approach to policymaking means that even if there is an “adult” in the Treasury, what the president-elect wants matters most. His threat of expedited tariffs on America’s three largest trading partners — tied to accusations of permitting illegal migration and drug trafficking — should be a wake-up call for those clinging to hopes of economic orthodoxy or predictability from Trump’s government. The announcement shows that the president-elect is willing to cause chaos, whether as a negotiating tool or otherwise, to meet his goals. The tariffs would increase costs and raise uncertainty across all economies involved. They would also undermine the trade agreement Trump signed with Canada and Mexico in his first term. Mexico’s president has already hinted at retaliation. Any stabilising influence from Bessent will be limited by other factors too. Economic policy is largely controlled by key roles within the White House, which are yet to be filled. Republican politicians will also have a strong say on fiscal matters. Lutnick and the as yet unnamed US trade representative will oversee tariffs, the most consequential part of Trump’s agenda. If he is voted in, as expected, Bessent may also be wary of rocking the boat. The former president does not treat dissenters lightly. Indeed, Bessent has floated some worryingly unorthodox ideas himself, perhaps to woo Trump. He proposed a “shadow” US Federal Reserve chair, which would undermine the central bank’s independence, though he later backed away from the idea. He also upped his support for tariffs in an article earlier this month.There is at least some solace for investors that Trump chose Bessent rather than an outright ideologue or maverick. It suggests the former president is somewhat sensitive to the stock and bond markets. Akin to Steven Mnuchin, Trump’s first Treasury secretary, Bessent could yet exert some balancing influence behind the scenes. But the lesson for investors to take from the past few days is that major economic policies will be decided on Trump’s whim. Markets need to saddle up for volatility. More