Mexico may retaliate with its own tariffs after Trump threat, new president says

Mexican President Claudia Sheinbaum has clapped back at President-elect Trump’s proposed 25% tariff on imported goods from Mexico, saying she would impose tariffs of her own on the U.S. and suggested it could lead to a tit-for-tat trade war between the countries as well as more inflation.

Trump on Monday said he would issue an executive order upon taking office to charge Mexico and Canada a 25% tariff on all products coming into the U.S., as well as additional tariff hikes on China over the flow of illegal immigrants and illicit drugs. 

In a Truth Social post, Trump, who takes office on Jan. 20, 2025, said thousands of people were "pouring through" Mexico and Canada "at levels never seen before."

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But Sheinbaum, who has been in office for about seven weeks, on Tuesday warned that tariffs would cause inflation and job losses in both countries, highlighting the number of U.S. auto manufacturers based in Mexico. 

"One tariff will follow another and so on, until we put our common businesses at risk," Sheinbaum said in a letter to Trump, which she read at a press conference and plans to send later today.

"What sense is there?" in escalating cross-border tariffs, Sheinbaum added, underscoring that they would hit particularly hard U.S. carmakers with plants in Mexico, such as General Motors and Ford.

Mexico's automotive industry is the country's most important manufacturing sector, accounting for over 35% of manufactured exports by value. The U.S. is by far the dominant destination for vehicles made in Mexico, with up to 79% of them heading north across the border.

Mexico represents nearly 25% of all North American vehicle production.

"It is unacceptable and would cause inflation and job losses in Mexico and the United States," Sheinbaum said, per The Associated Press. "If tariffs go up, who will it hurt? General Motors?"

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She offered to talk about the issues and said she hoped both her administration and the incoming Trump administration could meet soon. 

Sheinbaum, Mexico's first female president, added she would also seek a call with Trump and send a letter to Canadian Prime Minister Justin Trudeau.

In the Truth Social post, Trump said thousands of people are currently coming from Mexico in a caravan and that it appears "unstoppable."

"This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!" he added. "Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem."

Dating back to his first administration, Trump has long pushed Mexico to be more proactive in preventing the flow of illegal immigrants and illicit drugs into the U.S.

"And until such time that they do, it is time for them to pay a very big price!" he wrote.

Sheinbaum said Mexico was helping to stem the flow of migrants traveling through the country before crossing into the U.S. Numbers have been dropping sharply at the border since June, when President Biden signed a presidential proclamation drastically limiting the number of arrivals who can come into the U.S.

In September, there were 101,790 encounters at the border, the lowest number since February 2021, and there have been no major signs of a significant increase in numbers since then.

Sheinbaum also noted that criminal groups in Mexico were still receiving guns from the U.S. She said the region's shared challenges required cooperation, dialogue and reciprocal understanding.

"We do not produce weapons, we do not consume the synthetic drugs. Unfortunately, we have the people who are being killed by crime that is responding to the demand in your country," she said.

Fentanyl, a synthetic opioid that is up to 50 times stronger than heroin and can be fatal in small doses, has claimed the lives of hundreds of thousands of Americans and is a factor in many drug overdose deaths. Many illegal drugs are laced with fentanyl to make them cheaper and more powerful. Some users don't even know they are ingesting the substance. 

WATCH: Trump to impose tariffs on Canada and Mexico

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U.S. officials have frequently said that illicit fentanyl is created in Mexico using Chinese precursors and is then smuggled across the border by drug cartels.

Trump said he would also institute an additional 10% tariff on all Chinese goods being imported into the U.S. over the "massive amounts" of drugs, in particular fentanyl, being smuggled into the U.S. 

Trump said he has spoken with Chinese officials about fentanyl coming into the U.S., noting that the communist nation previously promised to put to death drug dealers involved in the illicit trade, but failed to follow through.

FOX Business’ Louis Casiano and Adam Shaw as well as Reuters contributed to this report.