Trump Tariff Threat Sparks Guatemala Dollar Bond Sell-Off

(Bloomberg) -- Guatemala’s dollar bonds slumped the most in 14 months after U.S. President Donald Trump said his administration is examining tariffs, remittance fees, and other sanctions against the country.

Trump threatened the measures after he said Guatemala backed out of an agreement to become a “safe third country” to slow the flow of undocumented migrants to the U.S. Guatemalan President Jimmy Morales this month postponed a visit to Washington and said he had no plans to sign such a deal amid legal challenges.

The yield on Guatemala’s dollar bond maturing in 2022 rose 0.14 percentage point to 3.26%.

The Trump administration has been eager to secure a safe-third-country deal that would obligate Guatemala to offer asylum to migrants who enter its territory. That means many of those leaving Honduras and El Salvador could be prevented from claiming asylum status in the U.S., because they had previously been able to make a refugee appeal somewhere else.

A draft copy of the agreement obtained by the New Yorker also stated the U.S. could send asylum seekers from any country to Guatemala, including those who never traveled through the country in the first place.

Trump did not explain what he meant by a “BAN,” but his administration previously has restricted entry to the U.S. by citizens of a group of countries -- most Muslim-majority -- that the administration says pose a security risk. Remittances from the U.S. comprise about 12% of Guatamala’s economy, according to the World Bank.

Guatamala “went back on their word to us,” Trump said at a speech on Tuesday to Turning Point USA, an organization for conservative college students. He confirmed in the speech that he was referring to his travel ban, which was upheld as constitutional last month by the Supreme Court. “People don’t realize, we won the ban,” he said.

The Trump administration announced earlier this year it was cutting off foreign aid to Guatemala -- as well as El Salvador and Honduras -- because the president was frustrated the countries weren’t doing enough to slow the flow of migrants entering the U.S. Trump also threatened Mexico with tariffs over the immigration flows, though an eventual agreement struck with the Mexican government to beef up internal security did not include a safe-third-country element.

To contact the reporter on this story: Justin Sink in Washington at jsink1@bloomberg.net

To contact the editors responsible for this story: Alex Wayne at awayne3@bloomberg.net, Justin Blum

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