* This story, originally published on Wednesday morning, was updated on Wednesday afternoon to reflect new developments including a significant change in the USD:MXN exchange rate.
The Mexican peso depreciated to above 21 to the US dollar on Wednesday morning amid an escalating trade war between the United States and China.
However, the currency got a significant boost later in the day after United States President Donald Trump announced a major change to his tariff policy.
After losing ground during the past three trading days, the peso slid again on Wednesday morning to reach 21.07 to the greenback, according to Yahoo! Finance.
Tipo de cambio de nuevo en 21 pesos por dólar. pic.twitter.com/Ei5iG8WxBv
— Gabriela Siller Pagaza (@GabySillerP) April 9, 2025
The peso subsequently strengthened to trade at 20.95 to the dollar at 10 a.m. Mexico City time.
The currency saw a much larger appreciation later in the day after Trump announced he was lowering the United States’ maximum “reciprocal tariff” rate to 10% for at least the next 90 days.
While trading conditions for Mexico didn’t change — the U.S. hasn’t imposed “reciprocal tariffs” on Mexican goods — the peso strengthened after the U.S. president’s announcement to close at 20.28 to the dollar, according to the Bank of Mexico (Banxico).
Compared to Banxico’s closing USD:MXN rate on Thursday of 20.81, the peso depreciated 1.2% to reach Wednesday’s low of 21.07. However, its end-of-day position was 2.6% stronger than 24 hours earlier.
The strengthening left the peso 1.7% weaker than its closing rate of 19.94 to the dollar last Thursday, the day after United States President Donald Trump announced new tariffs on imports from most countries around the world, but not Mexico.
Trump announced an additional 34% tariff on imports from China last Wednesday and subsequently raised the duty to 84% after Beijing retaliated with its own 34% tariff on imports from the United States. The Chinese government said it would match Trump’s 84% tariff on imports from the United States, and that duty took effect at midnight Thursday Beijing time.
On Wednesday, Trump announced that the United States would immediately impose a 125% tariff on goods from China in yet another escalation in the trade war between the world’s two largest economies.
The Mexico City-based financial group Monex said on Wednesday morning that the escalation of the trade war between the United States and China was weighing on the Mexican peso.
“Additionally, local inflation rebounded during March, showing the effect of the first tariffs on prices in our country,” Monex said.
Mexico’s headline inflation rate was 3.80% in March, according to national statistics agency INEGI, up from 3.77% in February. Despite the uptick, the Bank of Mexico is still expected to cut its key interest rate after its board’s next monetary policy meeting on May 15.
The central bank last cut borrowing costs in late March, lowering its benchmark rate by 50 basis points to 9%.
With reports from El Economista and Reuters
