*

Trump threatens tariffs on auto, chips and pharmaceuticals

*

South Africa's budget postponed due to coalition

disagreement

*

MSCI's Latam FX index down 0.4%, stocks fall 1%

*

Bank of Mexico halves 2025 growth view

(Updates to mid-session trading)

By Johann M Cherian and Purvi Agarwal

Feb 19 (Reuters) - Most Latin American currencies and

stocks declined against a stronger dollar on Wednesday as

investors priced in the likelihood of U.S. interest rates

staying elevated against the backdrop of a global trade war

intensifying.

MSCI's gauge of Latin American currencies

was down 0.8% against the greenback, and was on track to snap a

six-session winning streak.

Minutes from the U.S. Federal Reserve's latest meeting

showed President Donald Trump's initial policy proposals stoked

concerns about higher inflation, adding to uncertainty about the

world's most influential central bank's timeline on interest

rate cuts.

In his latest round of threats, Trump said he intends to

impose auto tariffs "in the neighborhood of 25%" and similar

duties on semiconductors and pharmaceutical imports.

"Before resuming rate cuts, officials would need to see

"further progress on inflation", which we suspect will fail to

materialise if President Trump follows through with even half of

his tariff threats," said Paul Ashworth, chief North America

economist at Capital Economics.

China is already in the midst of a trade war with the U.S.

and after the U.S. announced duties on steel and aluminum

imports, the European Union is investigating the need to tighten

tariff-free steel import quotas.

Investors will also be keen to see if Trump will re-impose

tariffs on Mexico and Canada after he paused them for a month on

February 1, following border security agreements.

Mexico's peso, the most sensitive to tariff headlines

in Latam depreciated 0.7%, while equities declined 0.6%.

Also dampening sentiment, the Bank of Mexico halved its

annual growth forecast for the domestic economy, and said it now

expects inflation to take longer to ease to its target of 3.0%.

Colombia's peso slipped 0.1%, with higher oil prices

limiting its declines, while Brazil's real weakened 0.7%.

Currencies of copper exporters Chile and Peru

dipped 0.2% and 0.3%, respectively, also hurt by a drop in

prices of the red metal.

On the equities front, the stock index lost

1.4%, with Brazil's Bovespa falling 1%.

Argentina's Merval stock index gained 0.5% and

Peruvian equities fell 0.7%.

Brokerage J.P. Morgan said equity markets in Argentina and

Turkey could post returns of more than 20% this year, driven by

policy reforms aimed at reducing inflation levels.

Separately, S&P Global Ratings revised its policy rate

forecasts for 2025 and 2026 for nine key emerging markets,

including Brazil and Mexico, with a median shift of 50 basis

points higher.

Elsewhere, South Africa's rand weakened 0.7% after

the government's national budget was postponed at the last

minute because of a disagreement between the political parties

in the ruling coalition regarding a hike of value-added tax.

The delay triggered the sharpest selloff in the country's

government bonds since December, with the 2052 maturity

down as much as 1 cent.

Key Latin American stock indexes and currencies at 2000 GMT:

Latin American market prices from

Reuters

Equities Latest Daily % change

MSCI Emerging 1136.72 -0.19

Markets

MSCI LatAm 2096.24 -1.45

Brazil Bovespa 127224.94 -1.02

Mexico IPC 54120.24 -0.65

Chile IPSA 7281.33 -0.23

Argentina 2402821.65 0.464

Merval

Colombia 1591.77 0.96

COLCAP

Currencies Latest Daily % change

Brazil real 5.728 -0.68

Mexico peso 20.4409 -0.99

Chile peso 950 -0.21

Colombia peso 4094.5 -0.08

Peru sol 3.691 -0.32

Argentina peso 1058.5 -0.02

(interbank)

Argentina peso 1205 2.43

(parallel)