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President Donald Trump delayed the tariffs until April 3 for goods covered by the North American trade agreement known as USMCA. The official announcement came after U.S. Commerce Secretary Howard Lutnick signalled earlier in the day that the president might walk back some of the planned levies.
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The rapid reversal “helped alleviate growth and inflation concerns from prolonged tariff disruptions,” said Dan Pan, an economist at Standard Chartered Bank.
Trump signed the order to delay tariffs for both countries after starting the day by saying duties would be delayed for Mexico, raising concern Canada wouldn’t be included.
The new date of April 2 is also when the president is expected to start unveiling plans for so-called reciprocal duties on nations around the world as well as sector-specific duties.
The loonie rose as much as 0.7 per cent, while the peso climbed one per cent. Both have trimmed gains after the initial reaction. The Bloomberg Dollar Spot Index dropped as much as 0.4 per cent, down for a fourth session.
“The temporary reprieve from 25 per cent tariffs should allow the CAD to strengthen somewhat in the short run,” said Shaun Osborne, the chief currency strategist at Scotiabank. “But scope for gains is probably limited to the US1.4200 to US1.4250 area in the short run.”
Investors will also take cues from Friday’s U.S. employment report, the dollar’s reaction and new political developments in Canada to determine loonie’s moves, Osborne said.
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Mexican President Claudia Sheinbaum held a press conference after her call with Trump Thursday, saying that Mexico’s goal is to avoid U.S. tariffs altogether. The country’s trade team continues to work on a deal with the Trump administration, she said.
Whirlwind
Currencies from both countries have seen frenzied trading in recent days, as markets reacted to shifts in the Trump administration’s tariff plans. The U.S. applied across-the-board 25 per cent tariffs on Canada and Mexico earlier this week, with the exception of Canadian energy, which faced a 10 per cent rate. The two nations have hinted at retaliatory measures.
On Wednesday, Trump offered a one-month exemption to automobiles covered by USMCA, and administration officials were considering exempting certain agricultural imports.
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“Plenty of headline risks remain as today’s delay is just another effort to kick the can down the road. The tariff uncertainty hurts Mexico’s domestic growth outlook as well as the U.S.,” Standard Chartered’s Pan said. “As the U.S. growth narrative shifts from exceptionalism to rising risks of recession, there may also be negative repercussions for Mexico.”
—With assistance from Kevin Simauchi and Leda Alvim.
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