Trump’s Tariffs Weaken the Canadian and Mexican Currencies

Canadian Dollar and Mexican Peso Decline as Tariffs Take Effect

Global Capitals –

Asian currency markets witnessed a sharp decline in the Canadian dollar and Mexican peso on Tuesday. Both currencies fell to their lowest levels in a month amid growing concerns of a potential trade war after U.S. President Donald Trump began implementing his threats to impose tariffs on Canada, Mexico, and China.

U.S. Tariffs Impact Currencies

At 05:01 GMT, the new tariffs imposed by Trump, set at 25% on goods coming from Mexico and Canada, took effect, along with an increase in tariffs on Chinese goods to 20%. Shortly after, China announced it would impose additional tariffs ranging from 10% to 15% on some U.S. imports, starting from March 10.

Canadian Dollar and Mexican Peso Drop

The Canadian dollar fell to 1.4508 USD during Asian trading hours, having touched its lowest level in a month at 1.45415 USD during Monday’s session. Similarly, the Mexican peso dropped by over 0.5%, reaching 20.821 against the dollar, marking its lowest point since February 3, according to Reuters data.

Impact of Tariffs on the Global Economy

Faso Menon, head of investment strategy at OCBC Bank, commented: “Trump’s decision to impose tariffs on Mexico and Canada has turned concerns into reality, causing anxiety in global markets.” He added that the tariffs are likely to fuel inflation expectations in the U.S. and could negatively affect economic growth, given the significant reliance on imports from these two countries.

Menon also noted concerns regarding potential retaliatory measures from Canada and Mexico, which could escalate the trade dispute further.

Reactions from Affected Countries

Canada announced that its retaliatory tariffs on the U.S. would take effect at 05:01 GMT on Tuesday. Meanwhile, Mexico’s Ministry of Economy reported that President Claudia Sheinbaum would hold a press conference in Mexico City on Tuesday morning to announce the official Mexican response to the U.S. tariffs.

Other Currency Movements

The Japanese yen rose to 149 against the dollar, approaching its highest level in four months, a peak it reached last week. The Chinese yuan remained stable against the dollar. The euro dropped to 1.04795 USD after a sharp rebound in the previous session. Market participants remain cautious, hoping for a peace agreement to end the war in Ukraine, especially after European proposals for a ceasefire. Meanwhile, the British pound fell by 0.12% to 1.2686 USD.

Sources:

• Reuters
• Mexican Ministry of Economy
• Official statement from OCBC Bank