NEW YORK (Reuters) – The Mexican peso tumbled on Monday as investors worried that trade disputes would again whipsaw markets after U.S. President Donald Trump’s overnight threat to impose steep tariffs on Colombia.
On Sunday, Trump said the White House would levy 25% tariffs on Colombia imports, mainly crude oil, coffee and flowers. His threat came after Bogota rejected U.S. military planes carrying deportees.
In a late night deal, Colombian and U.S. diplomats worked out an agreement for Bogota to accept the deportees without incurring tariffs.
“The market, over the last couple of weeks, had become complacent to the threat of tariffs, with the hope that the (U.S.) administration will take a more gradual approach,” said Arif Joshi, co-head of emerging markets debt at Lazard (NYSE:LAZ) Asset Management.
“Not only do this weekend’s events lower the probability of that theory, but also remind of how quickly the Trump Administration can turn on trade threats,” he added. “Everything else being equal, that increases volatility, increases risk and decreases currency valuations versus the U.S. dollar.”
The Colombian peso fell as much as 1.8% on Monday but pared most losses and was recently down 0.65% near 4,200 per dollar. Yet analysts at Wells Fargo (NYSE:WFC) recommended shorting the currency with a target of 4,600 per dollar, nearly 9% weaker.
Investors are jittery about how combustible things can get between Washington and its trading partners.
The Mexican peso fell as much as 2.3% on Monday, giving back almost all its year-to-date gains. The currency fell almost 20% to the dollar in 2024.
