Mexican President Claudia Sheinbaum on Tuesday warned US 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 per cent on Mexico and Canada.

“To one tariff will follow another in response 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 planned to send later in the day, warning that tariffs would cause inflation and job losses in both countries.

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 January 20, said late on Monday he would impose a 25 per cent 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 per cent of total trade, followed by Canada at 13.9 per cent. The US is also Mexico’s top trade partner.

“What sense is there?” in escalating cross-border tariffs, Sheinbaum added, underscoring that they would hit particularly hard US 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 per cent of manufactured exports by value. The United States is by far the dominant destination for vehicles made in Mexico, with up to 79 per cent of them heading north across the border.

Mexico represents nearly 25 per cent 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 US, that apprehensions of migrants at the border were down and that migrant caravans were no longer arriving at the US-Mexico border.

However, Sheinbaum noted that criminal groups in Mexico were still receiving guns from the US. 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.

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.

“Tariffs are a tax and would hurt both countries. We will find a solution,” said Ebrard, who earlier this month warned Mexico could retaliate with its own tariffs on US imports if the incoming Trump administration imposes tariffs on Mexican exports.

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 US economy, the final result was likely to be less severe.

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

Capital Economics economist Giulia Bellicoso said tariffs would likely hit Mexican equities by denting optimism about near-shoring – a trend of US firms setting up production facilities in Mexico – and curtailing investment.

“We expect Trump to start another trade war,” she said.

Sheinbaum said she was confident Mexico would reach an agreement with Trump but that should the US impose tariffs, Mexico had a plan to shore up its other trade relationships.

“We are not only looking to the north, but also to the south and to the European continent,” she said. “Mexico is strong and we will always come out on top,” she said.