By Felipe Barragán, Expert Research Strategist at Pepperstone

October 15, 2025

“The peso traded under pressure today, with sentiment increasingly driven by fresh escalation in U.S.-China trade rhetoric. Over the weekend, President Trump threatened to impose 100 % tariffs on Chinese goods starting November 1, drawing a sharp rebuke from Beijing, which vowed to “fight to the end.” China also responded with export controls on strategic inputs such as rare earths and more recently restrictions on US-linked vessels—moves that many viewed as a counterpunch.

The renewed tensions have rattled global markets, with equities slipping and safe-haven flows strengthening. Adding to downside pressures, oil prices fell nearly 2%, reaching a five-month low. The International Energy Agency warned of a growing supply glut amid rising output and slowing demand, dimming the outlook for oil-exporting economies like Mexico

For the peso, these external shocks triggers two distinct channels of pressure. First is the risk channel: in an environment of heightened uncertainty, carry and yield advantages matter less when investors are reallocating toward “safer” liquid assets (USD, Treasuries). Second is the commodity/fiscal channel: Mexico remains exposed to oil price weakness and fiscal stress at Pemex, both of which are vulnerable when global growth prospects dim under trade war escalation.

Another layer of complexity: Mexico is simultaneously considering increases in tariffs on selected Chinese imports—plans that Congress is reportedly pausing pending consultations. That puts Mexico in a delicate spot: any tilt too sharply against China may invite retaliation or disrupt supply chains, yet inaction may draw criticism in Washington as pressure to align more tightly with U.S. strategy mounts.”