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Tariffs on Mexico paused for a month, Trump says

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Brokerages warn of recession in Canada, Mexico

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Argentine peso trades for first time under new currency

regime

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MSCI Latam FX up 0.6%, stocks up 0.2%

(Updates after announcement that tariffs on Mexico paused)

By Purvi Agarwal and Lisa Pauline Mattackal

Feb 3 (Reuters) - Latin American currencies reversed

early losses and the Mexican peso picked up off a near

three-year low on Monday, after U.S. President Donald Trump

paused tariffs on Mexico in a surprise reversal that helped stem

a selloff in emerging market assets.

Trump paused the tariffs, initially imposed on Feb. 1, for

one month after Mexico agreed to reinforce its northern border

with 10,000 National Guard members to stem the flow of illegal

drugs, he said.

The Mexican peso reversed course to trade up 1.3%, on

pace for its best day in two weeks after earlier touching its

lowest level against the dollar since March 2022.

The announcement soothed some nerves following a broad

global selloff in risk assets, after Trump on Saturday ordered

sweeping tariffs of 25% on Mexican and Canadian imports, and 10%

on goods from China, starting Tuesday.

Both Mexico and Canada had announced retaliatory

tariffs, while China said it would challenge the order at the

World Trade Organization.

The MSCI's index tracking Latam currencies

and stocks turned positive, last up 0.6% and

0.2%, respectively.

The turnaround lifted hopes that Trump would use tariffs

more as a negotiating tool rather than a permanent move.

"We still think that permanent tariffs on the U.S.'s allies

(Canada, Mexico) will not be a thing, concessions are an

'easier' way to deal with Trump's 'problems,'" said Thierry

Wizman, global FX & rates Strategist at Macquarie.

The Colombian peso, Brazilian real and

Peruvian sol all turned higher on the day.

Mexican stock markets were closed for a public holiday, but

the U.S.-listed exchange-traded fund tracking Mexican stocks

rose 2.4% after tariffs were paused.

Still, uncertainty and concerns about a global trade war

weighing on growth remained, with the running concern of U.S.

tariffs weighing on the outlook for most emerging market assets

since Trump's election in November.

"The main transmission channel (of tariffs) to broad EM

markets has been elevated uncertainty about trade, immigration,

and security policy direction," said Gustavo Medeiros, head of

research, Ashmore Group.

Major brokerages, including JPMorgan, warned that the

economies of Canada and Mexico could enter a recession if the

tariffs were sustained.

The Chilean peso was down 0.5% despite strong

December economic activity figures, as copper prices hit a

four-week low.

Argentina's peso slipped 0.3%, in the first trading

session of a new currency scheme. The Merval index shed

2.2%.

Argentina and Mexico are due to announce monetary policy

decisions this week.

The South African rand pared some losses but was

still down 0.7% versus the dollar, after Trump threatened to cut

off funding for the country.

Highlights:

** Colombia's Ecopetrol extends contract with Occidental

Petroleum in Permian Basin

Key Latin American stock indexes and currencies at 1720 GMT:

MSCI Emerging Markets 1074.71 -1.71

MSCI LatAm 2029.86 0.18

Brazil Bovespa 126021.28 -0.09

Mexico IPC 51209.53 -1.62

Chile IPSA 7192.55 -0.1

Argentina Merval 2510334.0 -2.118

3

Colombia COLCAP 1507.52 -0.93

Brazil real 5.8194 0.37

Mexico peso 20.4173 1.26

Chile peso 985.3 -0.5

Colombia peso 4161.86 0.97

Peru sol 3.7125 0.39

Argentina peso (interbank) 1053.25 -0.166152

385

Argentina peso (parallel) 1200 1.6666666

67