- REUTERS/Joshua Roberts
The Mexican peso was weaker Wednesday after President Donald Trump said at a rally the evening before that he was willing to shut down the government to build a wall on the US border with Mexican. He also slammed NAFTA, again.
The currency was down by as much as 0.9% at 17.8167 per dollar at 8:07 a.m. ET.
It began weakening during Trump’s Tuesday-night campaign rally in Phoenix and remained in a downward slide over the next several hours.
Nevertheless, the currency is up by 19% since Trump’s inauguration.
“The obstructionist Democrats would like us not to do it, but believe me, if we have to close down our government, we’re building that wall,” Trump said at the rally.
He added that he had been elected to help boost national security and keep people from entering the US illegally and that those opposing the wall were hindering those efforts.
“Let me be very clear to Democrats in Congress who oppose a border wall and stand in the way of border security,” he added. “You are putting all of Americans’ safety at risk.”
Earlier Tuesday, the Democratic National Committee sent out a press release calling out the president’s “empty promises on border wall.”
“Trump has failed to deliver on his signature promise to build a border wall and have Mexico pay for it,” the DNC release said. “Trump even admitted in a private conversation with Mexico that his border wall promise was ‘the least important thing.'”
The email was met with ridicule on the left and was mocked on the right.
- Markets Insider
Trump also took a swipe at the North American Free Trade Agreement.
“Personally, I don’t think we can make a deal because we have been so badly taken advantage of,” he said. “I think we’ll end up probably terminating NAFTA at some point.”
“I personally don’t think you can make a deal without a termination, but we’re going to see what happens, OK? You’re in good hands, I can tell you,” he added.
Though NAFTA also includes Canada, Trump has generally focused his attention on Mexico, in part because of the US’s large trade deficit with its southern neighbor. But there are economic factors that support Mexico’s position in the renegotiation, according to analysts at BMI Research.
“Mexico’s negotiating strengths stem from the deep economic integration between the US and Mexico, and the negative impact that a disruption in supply chains and trade flows would have to key components of the US economy,” BMI said Wednesday in a note to clients.
“Given that farmers were a key constituency for President Donald Trump during his 2016 electoral campaign, we expect they will push back against major changes that could lead to a disruption of this trade,” the analysts continued. “Additionally, US companies benefit from Mexico as a manufacturing hub, where cheaper input costs not only provide for cheap consumer goods but also cheaper intermediate goods for US manufacturers, which helps keep them globally competitive.”
The first round of NAFTA renegotiations began last week in DC. Mexico and Canada expressed interest in “modernizing” the agreement, while the US came out stronger than expected. Round two is set for September 1-5 in Mexico City.