This week, President Trump reaffirmed his plan to construct a physical wall along the Mexican border and proposed using a 20% tariff on Mexican imports to pay for it. These statements caused Mexican President Enrique Peña Nieto to cancel an upcoming visit to the United States, where the two leaders were expected to discuss the North American Free Trade Agreement (NAFTA).
A tariff would cause prices for imported goods to rise, including Mexico’s major exports, vehicles and machinery, as well as food products like vegetables, fruits, and beer. President Trump’s hope is that changing trade policy will boost U.S. manufacturing more than it hurts other sectors of the economy.
Commodities traders are especially interested in trade with Mexico, which is the third-largest buyer of U.S. agricultural exports, primarily buying corn, soybeans, dairy, pork, and beef. If Presidents Trump & Nieto escalate their dispute and trade slows down between the two nations, U.S. farmers could suffer.
Partially due to these concerns, grains and livestock all fell near two-week lows on Friday.
Meanwhile, currency traders are following the war of words closely as well; fears of trade disputes or anti-Mexico actions have caused the Mexican peso to fall to an all-time low under 4.5 U.S. cents.