The Mexican peso is weaker Wednesday after President Donald Trump said at a rally that he’s willing to shut down the government to build a border wall on the Mexican border. 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.
But the peso didn’t sharply plunge immediately after the president spoke. It began weakening as Trump spoke, and remained in a downwards slide over the next several hours.
“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 Wedneday’s rally in Phoenix, Arizona.
He added that he had been elected to help boost national security and keep illegal immigrants out of the country and 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.”
Trump’s comments follow a press release sent Tuesday by the Democratic National Committee which called 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 read. “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.
Trump also took a swipe at the North American Free Trade Agreement (NAFTA).
“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.
Trump has generally focused his attention on Mexico rather than Canada, in part because of the US’ large trade deficit with its southern neighbour. But, there are economic factors that support Mexico’s position in the renegotiations, 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 in a note to clients Wednesday.
“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,” they 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 an interest in “modernising” the agreement, while the US came out stronger than expected. Round two is set for September 1-5 in Mexico City.