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The sinking peso

Trump already has Mexicans losing faith in their economy

Trump already has Mexicans losing faith in their own economy

Trumponomics: VICE Money comments on the economics of the Trump era.

Consumer confidence in Mexico fell to a record low in January as Donald Trump took office and promptly got into a public, nasty spat with Mexico’s president.

Bank of Mexico data showed its consumer confidence index fell in January to its lowest level since the central bank started collecting data, back in 2001.

The sharp decline in Mexican consumer confidence is just one of the myriad ways Trump’s election and presidency is reverberating through global economics and business. As the data rolls in, our Trumponomics series will periodically point out examples of where Trump’s presence is clearly having an outsized impact.

There are good reasons for Mexicans to be nervous, even setting aside the fact that Trump’s campaign began with a speech in which he essentially called Mexican immigrants criminals and rapists.

Trump has vowed to overhaul the North American Free Trade Agreement, potentially disrupting Mexican trade with its single largest market. Trump’s nominee for commerce secretary, billionaire investor Wilbur Ross, has said revamping the trade deal would be his top priority if confirmed. And amid a spat with Mexican leaders in late January, Trump administration officials have floated the idea of a 20 percent border tax on Mexican imports, with revenues to be used to pay for the border wall the president promised during the campaign.

The prospect of lower trade between Mexico and the U.S. has hammered Mexico’s peso. (All else equal, currencies fall if demand for a country’s exports decline.) The peso fell to a record low against the U.S. dollar in January.

And that causes a bunch of other problems for Mexico. Since a weaker peso pushes up the cost of imports, foremost among them gasoline, inflation will likely become a bigger problem. Gasoline prices already jumped roughly 20 percent in January, in a government move to cut subsidized fuel prices.

Protests and rioting ensued, with the people voicing displeasure at the gas price increases, Trump’s election, and Mexican President Enrique Peña Nieto.

No wonder people are a bit jittery.

 

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