Escalating trade tensions will disrupt Mexican growth: Fitch Ratings

MEXICO CITY (Reuters) - Fitch Ratings said on Friday escalating trade tensions between Mexico and the United States would disrupt growth in Latin America's second-largest economy after U.S. President Donald Trump threatened to slap tariffs on Mexican imports.

On Thursday, Trump announced 5% tariffs on all Mexican goods starting June 10 if the country does not halt the flow of illegal immigration, largely from Central America, across the U.S.-Mexican border. The tariffs would increase monthly to up to 25% on Oct 1.

The U.S. is Mexico's largest trading partner, accounting for close to 80% of the country's exports.

"Increasing trade tensions with the U.S. will undermine Mexico's already-weak economic activity. Recent growth has been led by sectors closely tied to the U.S. manufacturing sector," Fitch said.

Mexico shipped $346.5 billion of goods to the United States in 2018, representing 28% of the Latin American country's gross domestic product, according to the report.

Manufacturing exports from Mexico to the United States rose 9.1% in value in 2018, the highest since 2011, Fitch said.

(Reporting by Debroop Roy in Bengaluru and Stefanie Eschenbacher; Editing by Frank Jack Daniel and Sriraj Kalluvila)

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