EMERGING MARKETS-Latam FX falls as markets take in Trump's new tariffs

By Purvi Agarwal

July 14 (Reuters) - Most Latin American currencies edged lower on Monday, extending last week's losses as investors stayed cautious over U.S. President Donald Trump's tariff strategy.

Over the weekend, Trump escalated his tariff threats, proposing a 30% levy on imports from Mexico and the European Union, both of which are currently engaged in trade negotiations with the United States.

Mexico, whose exports to the U.S. account for more than 80% of its total exports, faces heightened vulnerability to such tariffs.

The Mexican peso MXN= fell 0.6% against the greenback, while international bonds in the country edged slightly, most trading less than 1 cent lower to the dollar.

"It's not clear how seriously we should take the threat. Mexico has faced more tariff warnings than most this year, yet has emerged relatively unscathed," said Kimberley Sperrfechter, emerging markets economist at Capital Economics.

Sperrfechter added that even if tariffs were implemented, the impact on Mexico would likely be limited, provided goods and electronics under the existing free trade agreement, USMCA, remained exempt.

Markets have largely shrugged off U.S. tariff threats, betting on Trump's back-and-forth stance and the potential for more trade agreements ahead of key deadlines.

Last week, emerging markets faced renewed pressure from Trump's tariff actions, including broad duties on Asian economies, Brazil, and copper imports, which could weigh on resource-reliant economies such as Chile.

The Latam currency index .MILA00000CUS dropped about 1.8% last week, marking its steepest decline since February and edged down 0.3% on Monday.

Most other Latin currencies were also lower, with the Chilean peso CLP= down 1%, the steepest fall among peers, as it traded near its lowest levels since April 21 during its fourth consecutive session of losses, pressured by falling copper prices.

Brazil's real BRL= also reversed initial gains to decline 0.6%.

Central bank data showed Brazil's economic activity unexpectedly fell in May, while Argentina's monthly inflation rate slightly ticked up in June after slowing to its lowest in five years.

MSCI's regional equities index .MILA00000PUS fell 0.7%, with Brazilian stocks .BVSP down 0.7% and Mexican stocks .MXX slipping 0.3%, while Argentinian shares .MERV surged 2.8%.

In emerging markets, Trump announced new weapons for Ukraine and threatened sanctions on buyers of Russian exports unless Moscow agrees to a peace deal.

This followed Trump's earlier decision to send Patriot missiles to Ukraine. Dollar-denominated bonds of Ukraine showed mixed performance, with the 2035 maturity XS2895057177=TE rising 0.4 cents on the dollar, while the 2036 maturity XS2895057334=TE remained flat.

Russia's rouble RUB= weakened 0.2% against the dollar, paring some earlier declines, over-the-counter market data showed.

Key Latin American stock indexes and currencies: