*

Latin American stocks down 2.5%, currencies off 1.9%

*

Trump weighs tariff hikes on Chinese imports

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Peruvian lawmakers oust president; head of Congress sworn

in

Producer prices in Brazil fall 0.2% in August

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Mexico's industrial output falls 0.3% on monthly basis in

August

(Updates with afternoon prices)

By Nikhil Sharma and Pranav Kashyap

Oct 10 (Reuters) -

Latin American markets sank deeper into the red on Friday as

trade war jitters resurfaced following Donald Trump's

threat on Chinese imports, echoing the losses after the U.S.

President's "Liberation Day" tariffs.

Trump threatened a "massive increase" in tariffs on

imports from China, in retaliation for Beijing's plan for export

controls related to production of rare earths - roiling global

financial markets.

A key gauge of Latin American equities

tumbled 2.5%, while a similar index tracking regional currencies

sank 1.9% - both set to mark their steepest

daily drop since early April, when Trump first unleashed tariffs

on global trade partners on what he calls "Liberation Day."

Brazil's real fell 2.5% against the dollar,

capping its worst week in over a year as fiscal fears gripped

local markets. The selloff comes after

Congress scrapped a key budget measure

, forcing the government to consider tax tweaks to plug the

gap, Finance Minister Fernando Haddad said late on Thursday.

Fresh data added to the gloom; producer prices fell 0.2%

in August, following a lower-than-expected rise in consumer

inflation in September.

Sao Paulo's main stock index fell 0.7%, and was

down 2.3% for the week.

Peruvian stocks fell 1.4%, while the sol

was down 0.2% due to political uncertainty. Peru's

Congress swore in legislative chief Jose Jeri as the country's

new president - less than an hour after unanimously ousting Dina

Boluarte, amid surging public anger over rising crime and

corruption allegations.

"Peru has historically had a lot of uncertainty and a

dynamic political environment, to say the least," said Jae Lee,

co-portfolio manager of local currency for the TCW Emerging

Markets Group.

"But the currency in and of itself continues to do well. One

of the big things for the currency is improved terms of trade."

Peru's main equity index is down 1.5% this week.

Mexico's main equity index was down 0.4% and down

2.2% week-to-date.

The Mexican peso fell 1.1%, taking its weekly loss to

1% after inflation data on Thursday kept expectations for

further rate cuts intact.

The Bank of Mexico said it will assess whether to push ahead

with rate cuts, according to minutes of the central bank's last

meeting.

Fresh data revealed Mexico's industrial production fell 0.3%

in August on a monthly basis.

Argentina's stock market was closed for the day. It was up

6.64% this week, while the local peso was set for modest

gains after U.S. Treasury Secretary Scott Bessent said on

Thursday that Washington had purchased pesos and finalized a

landmark $20 billion currency-swap deal with Argentina's central

bank.

The country is set to hold midterm elections on October

26 that will be a critical test for libertarian President Javier

Milei, who recently suffered a heavy blow in a local provincial

election.

Colombia's peso dropped to a one-month low,

tracking a plunge in oil prices. Stocks in Bogota fell

1.2%.

Key Latin American stock indexes and currencies:

MSCI Emerging Markets 1363.15 -0.93

MSCI LatAm 2411.41 -2.47

Brazil Bovespa 140746.58 -0.68

Mexico IPC 60600.17 -0.36

Argentina Merval 1924930.02 5.797

Chile IPSA 8694.94 -1.4

Colombia COLCAP 1866.81 -1.19

Brazil real 5.5019 -2.49

Mexico peso 18.594 -1.13

Chile peso 959.76 -1.05

Colombia peso 3918.6 -0.93

Peru sol 3.434 -0.19

Argentina peso (interbank) 1418 0.85

Argentina peso (parallel) 1455 1.37