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Mexican minister flags investment risk of planned Trump tax cuts

Reuters

MEXICO CITY (Reuters) - Mexico's economy minister on Wednesday flagged potential risks to investment stemming from U.S. tax cuts under the incoming administration of President-elect Donald Trump, who has vowed to defend the U.S. manufacturing sector.

One day after U.S. carmaker Ford canceled a planned $1.6 billion plant in central Mexico, Economy Minister Ildefonso Guajardo told a Mexican radio station future decisions to invest would depend on how competitive his country is in attracting business.

In addition, tax proposals being discussed in the United States could prove an important variable, Guajardo noted.

"There's speculation about the tax reform that could be carried out in the United States, and there's talk of the next administration's desire to cut the corporate tax rate which could make a radical change to investment decisions," he said.

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"Against this, not just Mexico, but also the world needs to analyze and react to what could be happening regarding the equilibrium on investment decisions," Guajardo added.

Trump, who has targeted Mexico in his plan to bring jobs and investment back north, aims to reduce the current seven tax brackets in the United States to three. He has also proposed cutting the corporate tax rate to 15 percent from 35 percent.

The real estate tycoon has said he will tear up a free trade agreement between the United States and Mexico if he cannot renegotiate it in favor of his homeland, as well as threatening to slap hefty tariffs on Mexican-made goods.

One senior Mexican official, speaking on condition of anonymity, said that deep tax cuts in the United States under the incoming president could prove a bigger threat to Mexico's business interests than Trump's threats to impose tariffs.

(Reporting by Dave Graham; Editing by Alistair Bell)