 "Trump 2.0: 25% tariff on Canada, Mexico likely from February 1; dollar rebounds")
The dollar rebounded in choppy Asian trade on Tuesday after US President Donald Trump suggested the United States could impose tariffs on Canada and Mexico in the near future, though details were lacking.
Trump was quoted saying his team was thinking of tariffs around 25 per cent which could be announced on February 1, but offered no other specifics.
The comments came as a surprise given officials had earlier signalled any new taxes would be imposed in a “measured” way, a major relief for trade-exposed currencies. A following memo merely directed agencies to investigate and remedy persistent trade deficits.
A tariff of “25 per cent looks high as a starter, and markets reacted quickly, especially in FX,” said Shoki Omori, chief global desk strategist at Mizuho Securities in Tokyo.
“I think market participants thought Trump would start with China, with say a 10-20 per cent tariff on goods but gradual increase.”
The market reaction was a knee-jerk fall in the Canadian dollar and Mexican peso, which helped the dollar pare losses suffered on Monday. The dollar climbed 1.2 per cent to 1.4475 Canadian dollar , while adding 1.3 per cent on the peso.
The dollar index bounced 0.6 per cent to 108.65, having shed 1.2 per cent overnight in what had been the sharpest daily loss since late 2023.
Impact Shorts
More ShortsThe euro fell back to $1.0364 , from an early top of $1.0434. The EU runs a sizable trade surplus with the United States and has been seen as a major target for Trump’s tariffs.
The dollar regained 0.3 per cent on the Japanese yen to 156.06 , after earlier touching a five-week trough at 154.90.
The yen had made gains last week on growing expectations the Bank of Japan would raise rates at its policy meeting this Friday.
The dollar also added 0.3 per cent on the Chinese yuan to 7.2847. Trump has in the past threatened China with tariffs of up to 60 per cent.
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