Mexico’s Options in a Trump Trade War

11/20/16 The Wall Street Journal

mexico cityIf the sharp selloff of the Mexican peso after the Nov. 8 election of Donald Trump were set to music it might sound like a funeral dirge, the dearly departed being the North American Free Trade Agreement (Nafta). The peso has fallen to an all-time low of more than 20 to the dollar, and on Thursday the Bank of Mexico raised its benchmark interest rate to stem the bleeding.

Mexico investors are worried that Mr. Trump might actually believe—as he argued in his campaign—that U.S. productivity growth and job creation depend on renegotiating Nafta to discourage U.S. investments south of the border. But Mexico won’t easily yield to a new deal that limits its access to U.S. markets in order to make it less attractive as a destination for capital.

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