Mexico and Canada ETFs React to Tariffs & Rate Cuts

Canadian and Mexican financial markets posted strong gains this week, buoyed by positive developments on the trade and economic fronts. The postponement of U.S. tariffs provided a much-needed reprieve for both economies, while domestic factors—a shift in economic sentiment in Canada and a rate cut in Mexico—further fueled market optimism. However, uncertainties remain as both nations navigate ongoing geopolitical and economic challenges.

A Temporary Reprieve from U.S. Tariffs

The looming threat of trade restrictions from the U.S. had weighed heavily on both Canada and Mexico, but a last-minute agreement reached with President Trump pushed back the imposition of tariffs by one month. This delay followed negotiations regarding border control measures, with Mexico deploying 10,000 national guardsmen to curb migration and Canada committing $1.3 billion to fortify its border security, particularly to combat fentanyl trafficking. The market response was swift, with Mexican equities surging more sharply than Canadian markets in reaction to the announcement.

Canada’s Economic Response and Market Sentiment

Beyond trade developments, Trump’s tariff threats rekindled a sense of economic nationalism in Canada, leading to increased support for domestic businesses. Many analysts believe that this sentiment could lead to a longer-term shift, with more businesses and consumers advocating for greater trade diversification beyond the United States. Last week, Canadian markets saw moderate gains, reflecting both relief over the tariff delay and confidence in the country’s strategic response to economic pressures.

Mexico’s Rate Cut and Market Rally

Meanwhile, Mexico’s central bank slashed its benchmark interest rate by 50 basis points to 9.50%, citing slowing inflation and economic contraction risks. With headline inflation easing to 3.69% in mid-January, policymakers signaled openness to further cuts if disinflation continues as projected. The market welcomed this move, as lower interest rates typically stimulate investment and economic growth. Investors reacted positively, with Mexican equities rallying significantly over the week, outpacing broader North American markets.

Mexico Leads ETF Performance

Mexican and Canadian ETFs posted solid gains over the week, reflecting investor optimism following the tariff delay and Mexico’s interest rate cut. Mexican-focused ETFs surged +3.76% WTD, with the iShares MSCI Mexico ETF (EWW) leading the way, rising +3.79% WTD and +8.29% YTD. Canadian ETFs advanced more modestly, up +1.37% WTD, with the iShares MSCI Canada ETF (EWC) gaining +1.37% WTD.

Here’s a comparison between Canadian and Mexican ETFs

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Investing in Mexican Stocks ETFs in Europe

For European investors interested in Mexican Equity ETFs, there are the following options to explore:

• Xtrackers MSCI Mexico UCITS ETF
• iShares MSCI Mexico Capped UCITS ETF

Investing in Canadian Stocks ETFs in Europe

Canadian Equities are also available for European investors via these ETFs:

• iShares MSCI Canada UCITS ETF
• UBS ETF – MSCI Canada UCITS ETF
• Xtrackers MSCI Canada ESG Screened UCITS ETF
• OSSIAM BLOOMBERG CANADA PAB UCITS ETF
• HSBC MSCI CANADA UCITS ETF
• All Europe-listed Canada Equities ETFs

Sign up for a free Trackinsight account and use the Trackinsight ETF Screener. It’s the most popular ETF screener for global investors. With advanced filtering and an extensive database of all funds, you can find the best ETF for you. You can also use the Trackinsight comparison tool, which allows you to compare up to five ETFs on one screen.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.