Mexican equities staged a historic rally on Thursday, defying a global market sell-off.

When President Donald Trump announced steep trade tariffs targeting key U.S. partners, he spared Mexico and Canada.

The United States-Mexico-Canada Agreement (USMCA)—a trade agreement that went into effect on July 1, 2020—shields U.S. neighbors from the immediate fallout.

The decision surprised market participants, who had expected a heavy tariff on the Central American economy. After all, Mexico runs a large trade surplus in goods with the U.S.

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Mexican Equity ETF Outperforms S&P 500 By Widest Margin Since September 1998

The iShares MSCI Mexico ETF — a popular vehicle for U.S. investors seeking exposure to Mexican equities — surged 4.5% on the day. This marks its strongest one-day gain since June 2024.

Its performance was aided by the Mexican peso, which rose 1.4% against the dollar.

Meanwhile, the SPDR S&P 500 ETF Trust ( SPY ) plummeted 4.8%. That’s the worst daily performance since June 2020.

This sets up an extraordinary 9.2 percentage point outperformance by Mexican stocks over their U.S. counterparts — a historically rare divergence.

According to historical market data, a performance gap of this magnitude between the two ETFs hasn't been seen since Sept. 15, 1998, when the Bank of Mexico intervened to defend the peso during a capital exodus from emerging markets triggered by Russia's default crisis.

Top daily performers included Operadora de Sites Mexicanos, S.A.B. de C.V. (OTCPK: OPMXF), which surged 5.5%, Bolsa Mexicana de Valores, S.A.B. de C.V. (OTCPK: BOMXF), up 4.7%, and Grupo Carso, S.A.B. de C.V. (OTCPK: GPOVF), which gained 3.9%.

Which Tariffs Are Applied To Mexico?

According to Goldman Sachs economist Alberto Ramos, the April 2 tariff order does not alter existing restrictions placed under the IEEPA (International Emergency Economic Powers Act) related to fentanyl and migration issues.

"USMCA-compliant goods will continue to see 0% tariff; non-USMCA compliant goods will face a 25% tariff, while non-compliant energy and potash exports are subject to a 10% levy," Ramos wrote in a note.

Should the IEEPA orders be lifted, non-compliant goods would face a 12% "reciprocal" tariff, while USMCA-compliant exports would retain preferential access.

Mexico’s exports to the U.S. account for over 27% of GDP, underscoring the country's elevated sensitivity to U.S. trade policy.

Ramos estimates that, under current rules, average U.S. tariffs on Mexican imports amount to roughly 8%, assuming most trade shifts to USMCA-compliant channels.

Should more trade migrate to USMCA-compliant categories and if reciprocal tariffs replace IEEPA orders, the average effective tariff rate could fall slightly above 6%, improving Mexico's competitive positioning.

Despite the relief rally in Mexican assets, the economist cautions that Mexico remains indirectly exposed to global fallout.

The broader package of reciprocal tariffs could dampen global growth and weigh on U.S. industrial demand, which would eventually affect Mexican exporters.

“All in, in relative terms Mexico's external competitiveness was not hurt by today's announcements versus the current tariff baseline, but indirectly Mexico and LatAm could suffer from the potential impact on US and global growth of the broad reciprocal tariffs and any eventual retaliatory measures,” he said.

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