EMERGING MARKETS-Mexican peso, stocks slide after Trump's tariffs take effect

By Shashwat Chauhan

March 4 (Reuters) - Mexican shares sank, while the peso dropped more than 1% against the dollar on Tuesday after U.S. President Donald Trump's trade levies on Mexico, Canada and China took effect, launching new global trade conflicts.

Trump's new 25% tariffs on imports from Mexico and Canada - after an initial 30-day pause - went live at 12:01 a.m. (0501 GMT), along with a doubling of duties on Chinese goods to 20%.

The peso MXN= slid 1.2% to a one-month low, while one-month implied volatility on the currency MXN1MO=FN stood at its highest since February 5.

Mexican President Claudia Sheinbaum said there was no justification for the tariffs and said her government would respond with tariff and non-tariff measures, while Canada also announced some countermeasures.

"We believe that the market is still underpricing tariff risks in Mexico. We would expect the implementation of tariffs to result in a significant heterogeneity in currency returns," BofA analysts said.

The equity benchmark in Latin America's second-biggest economy .MXX dropped almost 2%, hitting its lowest level in around a month.

Mexico's exports to the U.S. account for around 80% of its total exports and a quarter of its GDP, according to Capital Economics calculations. They expect Mexico's economy to contract by around 1% this year if the 25% tariffs stay in place.

China responded immediately after the deadline passed, announcing additional tariffs of 10%-15% on certain U.S. imports from March 10 and a series of new export restrictions for designated U.S. entities. Later it said it had raised complaints about the new measures with the World Trade Organization.

The onshore yuan CNY=CFXS appreciated against the dollar, aided by the central bank continuing a strengthening bias in its daily official guidance.

Any impact on the Chinese economy remains vital for Latin American countries, which are heavy producers of commodities like oil and copper - of which China is one of the world's biggest consumers.

Top copper producer Chile's peso CLP= edged 0.3% higher early on, while the Colombian peso COP= dipped 0.4% in low volumes.

MSCI's gauge for Latin American currencies .MILA00000CUS shed 0.6%, while the stocks index .MILA00000PUS dropped 1.6%, on pace to fall for the eighth straight session.

Equity markets in Brazil and Argentina were closed a second day this week for a public holiday.

Elsewhere in emerging markets, Ukraine's international bonds pared losses.

Later this week, global markets will also track U.S. jobs data due on Friday on growing concerns of the American economy's health, with traders ramping up bets of greater monetary policy easing by the Federal Reserve this year.

HIGHLIGHTS

Kenya to buy back about $580 million of 2027 Eurobond

Ecuador awards 20-year production sharing contract to New Stratus Energy, Sinopec-linked consortium

Key Latin American stock indexes and currencies: