EMERGING MARKETS-Latam stocks, FX sag as investors brace for US tariffs

By Johann M Cherian

April 2 (Reuters) - Currencies and stocks across most Latin American markets declined on Wednesday, as investors cautiously prepared for a series of reciprocal trade restrictions that President Donald Trump is likely to impose on trade partners of the United States.

MSCI's index tracking currencies in the region .MILA00000CUS dipped 0.3% flat against the dollar, while a gauge for stocks .MILA00000PUS lost 0.6%. Trump is expected to announce the policies at 2000 GMT, and they are likely to take effect immediately.

Analysts expect Trump's move to escalate a global trade war and in the long-run damage global economic growth.

Mexico's peso MXN=, which has been sensitive to tariff headlines, depreciated 0.5% and was last at 20.4 to the dollar, while local stocks .MXX dipped 0.1%.

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.

The second one-month pause to U.S. tariffs on Mexican and Canadian imports in compliance with existing free trade rules is also likely to expire later this week.

"Mexico is going to be the economy with probably the most complex set of tariffs and exceptions because of the interlinkages with the U.S. auto industry and the U.S. economy," said Padhraic Garvey, regional head of research, Americas at ING.

"The other story is that Mexico is the one low cost friend within which to manufacture some parts or even some vehicles. So it is very difficult to assess where (tariffs) on Mexico is gonna end up."

Adding to the gloom, a draft budget from the country's finance ministry showed it expects the economy to grow at a slower pace this year than previously expected.

Meanwhile, Brazil's real BRL= weakened 0.4% and the Bovespa index .BVSP lost 0.4% as investors assessed data that showed industrial production unexpectedly fell in February from the previous month.

The data fanned worries of an economic slowdown at a time when the local central bank has kept interest rates high in an attempt to soften inflation pressures triggered by increased government spending.

A poll showed a majority of Brazilians now disapprove of President Luiz Inacio Lula da Silva's performance leading Latin America's largest economy.

Still the country's local assets have fared better among peers this year as investors viewed the economy to be less exposed to trade risks.

Colombia's peso COP= was muted, while currencies of copper producers Chile CLP= and Peru PEN= slipped, tracking weak prices of the industrial metal. MET/L

Argentine markets were closed, but focus will be on any hints of a trade deal with the U.S. as President Javier Milei is set to visit the country on Wednesday.

Key Latin American stock indexes and currencies at 1443 GMT: