Latam markets jump on hopes of US tariff relief after Trump floats exemptions

By Shashwat Chauhan and Purvi Agarwal

(Reuters) - Latin American markets soared on Wednesday, with Mexico's peso regaining more of its tariff-driven losses as investors hoped for some relief from U.S. tariffs, while a weaker dollar also provided a lift.

In the latest move, U.S. President Donald Trump said he would exempt automakers from the tariffs on Mexico and Canada, for one month until they comply with the terms of an existing free trade agreement, and that he would be open to more exemptions.

The currency in Mexico, a part of supply chains for automakers, bounced back from one-month lows, and was last up 1.1%. Stocks in the country were 0.5% higher.

"There's relief and optimism to some degree, mainly because there's this chance that the tariffs might not go fully as in theory with the U.S. maybe considering some exemptions," said Quasar Elizundia, research strategist at Pepperstone, comparing the situation to the one-month reprieve given in early February.

Trump also held talks with Prime Minister Justin Trudeau amid hopes the two countries would reach middle ground, as suggested by U.S. Commerce Secretary Howard Lutnick's comments on Tuesday.

Global markets found some footing after the materialization of Trump's 25% tariffs on imports from Canada and Mexico, and a doubling of duties on Chinese goods rattled markets on Tuesday.

Mexican President Claudia Sheinbaum said she is tentatively set to have a phone call with Trump on Thursday. Mexico is set to lay down its retaliatory plans by Sunday, while Canada and China have already announced tit-for-tat tactics.

Elizundia said that Mexico was in a wait and see mode, and would proceed with countermeasures based on what actually takes place.

The dollar index slipped 1.2%, to its lowest level since early November, in its third consecutive session of losses.

The Brazilian real gained 2.3%, set for its best day since October 2022 as markets reopened following a public holiday.

Chile's peso appreciated 1.7% to trade at over four-month highs, supported by an uptick in copper prices, after the biggest commodities consumer China set out an ambitious economic growth target, Germany's infrastructure fund plans and a weaker dollar.

MSCI's gauge for Latin American currencies ticked 2.3% higher, set for its best day in over two and a half years.

The stocks index added 2.7%, on track to snap an eight-session losing streak, with regional indexes logging robust gains.

Global markets will also track U.S. job data due on Friday as concern mounts over the economy's health.

Elsewhere in emerging markets, Ukraine's international bonds recovered from steep losses earlier this week after Trump said Ukraine was ready to negotiate over the war with Russia, and that the U.S. was reconsidering funding for Ukraine.

HIGHLIGHTS

** Chile's SQM reports 41% drop in profit on lower lithium prices

** Profits for Colombia's Ecopetrol slide 22% in 2024

** Trump hails 'reclaiming' of Panama Canal after BlackRock-led group's deal to buy stake

** Mexico's Sheinbaum popularity may insulate her from tariff devastation

Key Latin American stock indexes and currencies:

MSCI Emerging Markets 1116.84 2.18

MSCI LatAm 2017.02 2.66

Brazil Bovespa 123191.27 0.32

Mexico IPC 52645.74 0.5

Chile IPSA 7333.1 0.26

Argentina Merval 2286858.6 3.68

9

Colombia COLCAP 1597.78 2.13

Brazil real 5.7517 2.27

Mexico peso 20.3517 1.14

Chile peso 927.88 1.69

Colombia peso 4113.5 0.64

Peru sol 3.65 0.49

Argentina peso (interbank) 1063.5 0.09

Argentina peso (parallel) 1205 2.07

(Reporting by Shashwat Chauhan and Purvi Agarwal in Bengaluru; editing by Barbara Lewis and Diane Craft)