EMERGING MARKETS-Mexican peso turns higher, Latam stocks rise after Trump announces reciprocal tariffs

By Johann M Cherian and Lisa Pauline Mattackal

April 2 (Reuters) - Mexico's peso gained ground and most Latin American stock indexes closed higher on Wednesday after U.S. President Donald Trump announced reciprocal tariffs on trading partners, with higher duties on select trading partners.

In a long-awaited announcement, Trump, on what he had dubbed "Liberation Day," said that he would impose a 10% baseline tariff on all imports to the United States and higher duties on some of the country's biggest trading partners, in a move that ratchets up a trade war that he kicked off on his return to the White House.

Mexico's peso, among the most sensitive in the region to tariff policy, MXN= reversed early losses and gained 0.1% to 20.17 to the dollar in choppy trading after a report that the new levies do not impose an additional 10% on Canada and Mexico, and retain USMCA exemptions.

Local stocks .MXX closed up 0.9%. Implied volatility options to buy or sell Mexican pesos overnight MXNONO=FN remained at their highest in nearly two months.

MSCI's index of Latin American stocks .MILA00000PUS rose 0.2%, with Colombian stocks .COLCAP leading gains among regional indexes. Most regional stock indexes had reversed early losses to trade higher prior to the announcement, tracking gains in U.S. equities.

MSCI's index, tracking currencies in the region against the dollar .MILA00000CUS, fell 0.2%.

More broadly, both MSCI's indexes of global emerging market currencies .MIEM00000CUS and stocks .MSCIEF were little changed on the day.

"The 10% tariff was on the lower end of what (Trump) has threatened on the campaign trail, I think he was looking at even 5% at some point (as) the baseline tariff number. I don't think it should be a surprise to the market," said Olga Yangol, head of Emerging Markets research and strategy, Americas at Credit Agricole CIB.

"We have to sift through the individual countries and the impact on them all."

Trump announced much higher duties, however, on other countries. The U.S. listed VanEck Vietnam ETF VNM.P dropped 6.4% in after-hours trading following the announcement of a 46% tariff on its imports.

The iShares MSCI Hong Kong ETF EWH.N lost 3% after Trump signed an order to end the "de minimis" trade loophole. The dollar touched a near two-month high against the Chinese yuan CNH=D3.

Analysts expect Trump's move to escalate a global trade war and, in the long run, damage global economic growth, while the uncertainty over the size and scope has weighed on global markets since the start of the year.

JPMorgan estimated that more than a third of emerging market companies are likely to be "meaningfully" impacted by U.S. tariffs when they hit, with Mexican and Chinese companies likely to be heavily impacted, given that the U.S. is a significant export market.

Mexican President Claudia Sheinbaum had said the country would not respond with tit-for-tat tariffs on the United States.

Brazil's real BRL= was little changed as the U.S. announced a 10% tariff on imports from the country. Investors also assessed data that showed industrial production unexpectedly fell in February from the previous month.

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