Mexican Peso Weakens Despite Nearing Repeal of US Steel Tariffs

The Mexican peso is weakening against several major currencies toward the end of the trading week. Despite senior officials claiming that they are close to striking a deal that would see the US repeal its tariffs on steel and aluminum from Mexico, the peso was unable to take advantage. This could show that traders are more concerned about its fledgling economy and the political turmoil that has unfolded only months after President Andres Manuel Lopez Obrador took office.

Last year, President Donald Trump imposed steel and aluminum tariffs on many trading partners, including Canada and Mexico. After a year of negotiations, the three countries established the United States-Mexico-Canada Agreement (USMCA), though the trade agreement has yet to be ratified.
Following a meeting with her Canadian counterpart in Toronto, Mexican Economy Minister Graciela Marquez revealed to the CBC that they are “close to negotiating the lifting of the tariffs.” She added that “we’re having very fruitful conversations on lifting the tariffs not only in the US but also here in Toronto.”
Her Canadian counterparts are meeting with US trade representatives in Washington this week.
But even if Mexican leaders are successful in their negotiations with their US counterparts, Congress still needs to ratify the agreement. Democrats in Congress have confirmed they will not ratify the USMCA unless Mexico delivers on a pledge to institute a series of stronger labor laws. To Mexico’s credit, lawmakers recently approved legislation that boosts the rights of trade unions.
Republicans, meanwhile, say they will only support the USMCA when the White House drops the tariffs. Senator Chuck Grassley (R-IA), the chair of the Senate Finance Committee, told reporters last month that there would be little chance of approving the trade pact if the steel and aluminum levies stayed in place.
On Thursday, the Bank of Mexico will announce its move on interest rates. The market is forecasting that the central bank will leave rates unchanged at a decade high of 8.25%. However, experts say that the central bank will eventually cut rates by the end of the year to spur economic growth.
The USD/MXN currency pair rose 0.18% to 19.0870, from an opening of 19.0522, at 16:37 GMT on Thursday. The CAD/MXN edged up 0.16% to 14.2000, from an opening of 14.1770.

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