MEXICO CITY: Mexican President Claudia Sheinbaum warned U.S. President-elect Donald Trump on Tuesday of dire economic consequences for both countries from tariffs and suggested possible retaliation following his threat of 25% cross-border tariffs on Mexico and Canada.

“One tariff will follow another in response and so on until we put our mutual businesses at risk,” Sheinbaum said in a letter to Trump, which she read aloud at a news conference, warning that tariffs would cause inflation and the loss of workplaces in both. countries.

Sheinbaum added that 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 Monday he would impose a 25% tariff on imports from Canada and Mexico until they cracked down on drugs, particularly fentanyl, and migrants crossing the border.

Mexico is the US’s largest trading partner in September, representing 15.8% of total trade, followed by Canada at 13.9%. The US is also Mexico’s top trading partner.

“What’s the point?” in escalating cross-border tariffs, Sheinbaum added, stressing that they would hit especially hard U.S. automakers with factories in Mexico, such as General Motors and Ford.

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 automobile production.

Tariffs could run afoul of the US-Mexico-Canada Agreement, a trade agreement the countries signed in 2020 under Trump’s first administration.

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

However, Sheinbaum noted that criminal groups in Mexico still received weapons from the United States

“We do not produce weapons, we do not consume synthetic drugs. Unfortunately, what we have are the people who are killed by the crime responding to the demand in your country,” she said.

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

His deputy, Luis Rosendo Gutierrez, said the tariff threats by Trump were consistent with the president-elect’s behavior during his first term.

“It’s his way of doing things,” Gutierrez said in an interview with the Radio Formula station. “At first he takes a really strong position, but then he sits down to negotiate. If he had just wanted to hike (rates), he would have done it on (Jan.) 20, he would not have given us advance notice.”

Financial analysts, meanwhile, reacted to Trump’s announcement with comments ranging from pessimism to cynicism.

At CIBanco, analysts said they believed the threat was a tactic to force Mexico, Canada and China into negotiations, and since those measures would also hurt the U.S. economy, the final outcome was likely to be less severe.

The Mexican peso weakened about 2% on Tuesday, worsening a steep six-month slide.

Capital economy economist Giulia Bellicoso said tariffs would likely hit Mexican stocks by dampening optimism about nearshoring — a trend for multinationals setting up production facilities in Mexico — and curbing 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 if the U.S. were to impose tariffs, Mexico had a plan to strengthen its other trade ties.

“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.”