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Mexican Peso and Canadian Dollar Weaken Amid U.S. Tariff Fears

Mexican Peso and Canadian Dollar Weaken Amid U.S. Tariff Fears. Source: Photo by Jorge Romero

The Mexican peso and Canadian dollar weakened significantly on Sunday as concerns mounted over U.S. President Donald Trump's escalating tariff threats. The peso took a sharper hit, with the USD/MXN exchange rate climbing 1.1% to 20.4949 pesos per dollar. The Canadian dollar also softened, with USD/CAD rising 0.1% to 1.4381.

The U.S. dollar, meanwhile, strengthened by 0.2% against a basket of currencies, recovering from steep losses last week. However, fears of new trade barriers weighed heavily on North American currencies after Trump imposed a 25% tariff on all imports from Colombia. The move came as retaliation against Colombia for denying landing rights to two U.S. military planes carrying deported migrants.

Trump warned that tariffs on Colombia could rise to 50% by next week if the country fails to comply with U.S. demands, further straining bilateral relations. These developments heightened market fears that similar tariffs could be levied against Mexico and Canada, targeting issues like immigration and perceived unfair trade practices. Trump has previously threatened tariffs of up to 25% on both nations and floated the possibility of a 10% tariff on imports from China, which could be enacted as early as February.

The prospect of increased trade tensions underscores the risks to global markets, with the peso and Canadian dollar particularly vulnerable. Investors remain cautious amid uncertainty over Trump's next steps, fueling volatility in currency markets.

The escalating tariff measures and strained diplomatic ties could have broader economic implications, impacting trade dynamics across the Americas and beyond.

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