Mexico's President Claudia Sheinbaum [Source: Reuters]

Mexican President Claudia Sheinbaum warned U.S. President-elect Donald Trump of dire economic consequences for both countries from tariffs and suggested possible retaliation following his threat of across-the-board tariffs of 25% on Mexico and Canada.

Sheinbaum added she would also seek a call with Trump and send a letter to Canadian Prime Minister Justin Trudeau.

Trump, who takes office on Jan. 20, said late on Monday he would impose a 25% tariff on imports from Canada and Mexico until they clamped down on drugs, particularly fentanyl, and migrants crossing the border.

Mexico is the United States’ top trade partner as of September, representing 15.8% of total trade, followed by Canada at 13.9%. The U.S. is also Mexico’s top trade partner.

Mexico’s automotive industry is the country’s most important manufacturing sector, accounting for over 35% of manufactured exports by value. The United States 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.

Tariffs could violate the United States-Mexico-Canada Agreement, a trade deal the countries signed in 2020 during Trump’s first administration.

Sheinbaum said her administration had shown Mexico’s willingness to help fight the fentanyl epidemic in the U.S., that apprehensions of migrants at the border were down, and that migrant caravans were no longer arriving at the U.S.-Mexico border.

However, Sheinbaum 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.

Sheinbaum’s economy minister, Marcelo Ebrard, who was Mexico’s foreign minister for part of Trump’s first term, praised her “firm” response in a social media post.

Financial analysts reacted to Trump’s announcement with commentaries ranging from pessimism to cynicism.

At CIBanco, analysts said they believed the threat was a negotiation tactic, and as these would also damage the U.S. economy, the final result was likely to be less severe.

The Mexican peso weakened some 2% on Tuesday, aggravating a steep six-month decline.