MEXICO CITY (Reuters) - On Monday night, President Donald Trump called for the State Department to label Mexican cartels as "foreign terrorist organizations," a move that increases the reach of U.S. law enforcement over the criminal groups but risks complicating international business, restricting asylum claims, and straining relations with Mexico, analysts say.

The move targets two key Trump promises- to tackle migration and drug trafficking-and looks to put cartels like Sinaloa and Jalisco New Generation on a par with others on the U.S. list of designated terrorist organizations, like Al-Qaeda, Boko Haram, Hezbollah, and the Islamic State.

Analysts interviewed by Reuters said the designation is unlikely to be a game changer in the war on drugs and does not dramatically alter existing powers bestowed on U.S. authorities to go after the cartels. The Kingpin Act- which dates back to the 1990s - allows for international sanctions and the prosecution of Americans who help the cartels, for example.

But it does throw a wider net for the prosecution of people or groups suspected of assisting the crime syndicates, analysts said, as well as make it easier to target cartel members operating abroad under U.S. law.

"The U.S. already has a lot of tools to go after the cartels," said Maria Calderon from the Washington D.C.-based Wilson Center's Mexico Institute. "But the 'material support' clause does open up the door to more possible prosecutions."

The designation does not - from a legal perspective - facilitate military action in Mexico, but some analysts said it could serve as a political stepping stone towards some form of military intervention by helping to build a rationale for it.

"There's nothing in the language of the law behind an FTO designation that authorizes any kind of military action," said Elisabeth Malkin, deputy program director for Latin America at International Crisis Group. "But it could change the mindset in Washington."

White House National Security Council spokesperson Brian Hughes said in a statement in response to Reuters' questions that, "Beyond the additional tools this designation provides President Trump and his administration, it sends a clear message to the cartels who threaten American citizens."

Mexico has long opposed the move, arguing the cartels are not motivated by political ends like others on the terror list, but by profit.

On Tuesday, President Claudia Sheinbaum adopted a less confrontational tone, saying the two countries needed to work together while respecting Mexican sovereignty.

"We all want to combat the drug cartels, that is evident. So what does one have to do? One has to join forces, collaborate with them (the U.S.) in their territory, us in our territory," she said during a regular morning press conference.

The order could also affect migrants, who are regularly shaken down for protection money or forced to pay kidnap ransoms by human smugglers, as 'supporting' a terrorist organization, effectively barring them from claiming asylum in the United States.

"It makes it virtually impossible to get asylum for any migrant who is forced to pay any kind of fees, including ransom, to the cartels," said Vanda Felbab-Brown, an expert at the Brookings Institution.

Mexican cartels make millions in the profitable business of human smuggling. They control swathes of territory at the border and along the migrant trail, areas where they often require payment to cross and routinely kidnap migrants for ransom.

It could also have the opposite effect, because fleeing U.S.-designated terrorist organizations in certain cases could strengthen migrants' claims for asylum, Brown and other observers noted, adding how it is interpreted will depend on political will.

BUSINESS RISK

A designation could also affect trade, experts say. Under U.S. law providing material support for such organizations can lead to asset seizures, criminal charges, and substantial fines.

U.S. and multinational businesses operating in many parts of Mexico often pay extortion and other payments to cartel-affiliated people to be able to produce, transport and sell goods. This designation, analysts say, could complicate trade, and make compliance harder.

"It could have a chilling effect for U.S. businesses across Mexico," said Brian Philips, a Mexico security expert at the University of Essex, but added, "we will have to see if U.S. authorities really go after companies for paying extortion."

A 2024 study from the American Chamber of Commerce in Mexico of 218 companies showed 45% had received demands for protection payments and 12% said that organized crime had "taken partial control of the sales, distribution and/or pricing of their goods."

The designation could also complicate compliance for money transfer companies that process payments across borders and operate in cartel-controlled areas, Philips and other analysts added.

The initial plan to designate Mexican cartels as terrorist organizations arose from Trump's promise to "wage war" on Mexican cartels in an effort to curb the fentanyl crisis ravaging U.S. communities.

But perhaps more importantly, some say, is the increased leverage over Mexico's political class.

"A large number of people in positions of power in Mexico -corrupt governors and mayors, members of the security forces, bankers - are going to be prosecutable or at least untouchable (to work with) for the U.S. government," said Adam Isacson, director of Defense Oversight at the Washington Office on Latin America.