Mexico and Canada Hit by 'Trump Tariff Bomb'... Currency Values Also Decline

Trump Hints at 25% Tariffs Starting February 1
China and BRICS Nations Also on Edge
Dollar Value Drops... Market Warns "Caution Needed"

From February 1st, the currencies of Mexico and Canada, which are set to face Trump-style tariff bombs, showed weakness.

According to the Wall Street Journal (WSJ) on the 20th (local time), the US dollar rose 0.8% against the Canadian dollar and 1.0% against the Mexican peso immediately after President Donald Trump's tariff announcement. It also rose 0.2% against the euro. However, it fell 0.3% against the Japanese yen.

On the same day, President Trump stated that he "expects to impose a 25% tariff starting February 1st" on Mexico and Canada, the counterparties of the United States-Mexico-Canada Agreement (USMCA).

Previously, right after winning the presidential election in November last year, Trump had announced on his inauguration day that he would impose additional tariffs of 25% each on Mexico and Canada, and 10% on China, citing their failure to prevent illegal immigration and drug inflows. Trump also threatened tariffs of at least 100% on BRICS countries such as Russia, India, Indonesia, and Iran.

However, WSJ added that the volatility in the foreign exchange market might have increased due to reduced liquidity on Monday, which was Martin Luther King Jr. Day.

Although the US dollar index fell 1.0%, the market considered it premature to judge this as a trend of sustained weakness. Philip Wee, a foreign exchange strategist at DBS Group Research, said, "We should be cautious about viewing the dollar's weakness as the start of a continuous downward trend."

He also predicted that if Trump completes his cabinet formation, trade and tariff policies might be pursued more aggressively. Strategist Philip Wee pointed out, "If Trump’s second-term cabinet is formed, it is expected to implement broader, more systematic, and extensive tariff policies than in the first term." So far, only Marco Rubio has been confirmed as Secretary of State in the Trump cabinet.

Meanwhile, the 10-year US Treasury yield fell by 7 basis points (bp, 0.01 percentage points) to 4.5370%. The absence of an immediate tariff announcement at Trump's inauguration may have provided some relief to the US Treasury market, but considering the tariff threats against Canada and Mexico, WSJ noted that this trend is unlikely to last long.

This content was produced with the assistance of AI translation services.