SYDNEY – The dollar rebounded in choppy Asian trade on Tuesday after U.S. 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% which could be announced on Feb. 1 but offered no other specifics.
The comments came as a surprise given officials had earlier signaled 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% 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% 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% to 1.4475 Canadian dollar, while adding 1.3% on the peso.
