By Lisa Pauline Mattackal

Feb 28 (Reuters) - Most Latin American currencies and stocks dropped on Friday, as investors assessed the risks of an escalating global trade war ahead of a March 4 deadline for proposed U.S. tariffs on Mexico, Canada and China.

U.S. President Donald Trump reiterated that 25% duties on imports from Canada and Mexico will come into effect on Tuesday, denting prospects of them being delayed further.

MSCI's gauge of Latin American currencies .MILA00000CUS fell 0.3% on the day.

Mexico's peso MXN=D3 edged down 0.1%. It was on track to slip 0.3% for the week, but eyed a 1% gain for the month. The country's main stock index .MXX rose 0.1%, and has gained over 6% in 2025.

"The market has been expecting the chaos that has ensued under this administration," said Varun Laijawalla, portfolio manager at asset manager Ninety One.

"But the dynamic at play in Mexico is, any deal that Mexico gets presented (from the U.S.) is a deal they should take, that means the uncertainty goes away... Mexico is actually an outperformer this year."

The index of regional stocks .MILA00000PUS dropped 0.7%. The index was set to lose 3.5% for the week, its worst week in over two months. The currency index was on track to fall 1.7% in its worst week since October.

A broadly in line reading of U.S. inflation data also kept the dollar supported.

Trading in emerging markets has been broadly volatile as investors assessed a whirlwind of tariff headlines and geopolitical developments. Overall, however, most Latam currencies have risen against the dollar this year as many investors have hoped that threatened tariffs are a negotiation tactic.

The Latam currency index was set for a second straight month of gains, with Chile's peso CLP= eyeing its strongest month in six with a 2.9% rise.

Elsewhere, Ukraine's dollar bonds slipped over 1 cent, though most maturities were on track to rise for the month. Trump and Ukraine's President Volodymyr Zelenskiy were expected to sign a critical minerals deal later in the day.

EM equities have seen $5.1 billion in outflows over the past four weeks, according to data from Bank of America Global Research. EM debt has seen two straight weeks of net inflows.

The overall EM stocks index .MSCIEF is set to fall 2%, and the currency index .MIEM00000CUS was on track to drop 0.4% on a weekly basis.

On the data front, Chile's unemployment rate hit 8.0% in the quarter through January.

Romania's leu EURRON= was steady against the euro after the pro-European coalition government survived a no-confidence vote.

Israel wanted to extend the first phase of Gaza truce by six weeks, Egyptian security sources said.

HIGHLIGHTS

** Brazil, Eletrobras reach deal over voting power, nuclear plant

Key Latin American stock indexes and currencies at 1520 GMT:

(Reporting by Lisa Mattackal in Bengaluru; Editing by Nia Williams)

((LisaPauline.Mattackal@thomsonreuters.com;))