Mexican peso, Canadian dollar slump after Trump threatens tariffs; USD strong

The Mexican peso, and the Canadian dollar fell sharply on Tuesday against the U.S. dollar, while the offshore Chinese yuan inched lower after the President-elect Donald Trump said he would impose a 25% tariff on all products from Mexico and Canada, and an additional 10% tariff on goods from China, citing concerns over illegal immigration and the trade of illicit drugs.

Trump said in a post on Truth.social that he had held numerous talks with Chinese officials over curbing the supply of drugs, particularly fentanyl, to the U.S., but claimed that such talks had not yielded any results, and that “drugs were still pouring into our country, mostly through Mexico, at levels never seen before.”

The Mexican peso's USD/MXN pair rose 1.8% to its highest level since early November, while Canadian dollar's USD/CAD jumped over 1% to its highest since May 2020.

In China, the offshore yuan USD/CNH pair rose 0.3% on Tuesday. Trump had threatened to impose an up to 60% tariff on all Chinese goods, a move that could potentially spark a renewed trade war between the world’s biggest economies.

The US Dollar Index jumped 0.5%, while US Dollar Index Futures were also higher in Asian trade.

During the election campaign, Trump consistently advocated the imposition of a 10% uniform import tariff rate applicable to all trading partners of the United States.

Source: Investing.com