Trump, Tech, and Trade: Mexico's Triple Test

As Donald Trump heads back to the White House after winning the U.S. election, Mexican markets are navigating a complex reality. The Mexican peso, now at 20 against the US dollar from 17 earlier this year, reflects both pressures and opportunities that make this moment uniquely different from 2016.

The immediate headwinds are clear: Banxico's three consecutive rate cuts from its previous 11.25% level, President Claudia Sheinbaum's judicial reform, and potential election turbulence.  Trump’s likely policies — from corporate tax cuts to trade barriers – could strengthen the dollar, despite his wishes otherwise. Any attempt to weaken the dollar would be futile – a potential US$300 billion direct intervention (the Treasury dollars in the market, for example) is a drop in the US$1.8 trillion daily currency ocean.

But here's what's different from 2016: Mexico's role in global trade has evolved dramatically. Nearly 400 new companies are expected to set up shop through 2025 thanks to nearshoring, while tech giants like Microsoft are betting big – US$1.3 billion for AI infrastructure investments over three years. Even Trump has shown openness to this new reality, suggesting he wouldn't mind Chinese companies like BYD opening factories in America – a stark departure from current policies.

Mexico's position between the United States and China has become more strategic. While this could be risky if U.S.-China tensions escalate, Mexico could also benefit from any "grand bargain" between Trump and Xi Jinping that market analysts see as possible by 2025-26.

Looking ahead, expect some peso pressure after Trump’s victory, but the currency's 17-21 range has held through tougher storms. This time, Mexico's story isn't just about U.S. elections or USMCA renegotiations, it's about an economy transforming through nearshoring and tech investment.

The verdict? Short-term volatility, yes. But Mexico's fundamentals suggest resilience, not vulnerability. Sometimes, what looks like market stress is actually growing pains.