The Canadian dollar plunged to a five-year low, and the Mexican peso remained under pressure on Thursday after former U.S. President Donald Trump renewed tariff threats against Canada and Mexico. Trump reaffirmed plans to impose 25% tariffs on imports from both countries, citing concerns over illegal immigration and fentanyl trafficking.
He set a February 1 deadline to finalize the tariffs and is considering whether to exempt Canadian and Mexican oil imports before they take effect on Saturday. The USD/CAD pair edged higher late Thursday, reflecting the loonie's decline, while the Mexican peso’s USD/MXN pair dipped slightly but stayed volatile after a 1% rise in the prior session.
Additionally, a 10% tariff on Chinese imports has been proposed to curb trade imbalances and pressure Beijing to crack down on drug trafficking. The escalating trade tensions have triggered market volatility and heightened risk aversion.
In response, Canadian politician Chrystia Freeland, a leading contender to succeed Prime Minister Justin Trudeau, announced plans for a retaliation list targeting U.S. exports. The proposed countermeasures, worth approximately C$200 billion, focus on products from politically significant states like Florida, Wisconsin, and Michigan.
With uncertainty mounting, markets brace for further instability as investors assess potential economic fallout from the tariffs.