Written by Wayne Cole
SYDNEY (Reuters) – The dollar rallied on choppy Asian trade on Tuesday after U.S. President Donald Trump suggested the United States could impose additional tariffs on Canada and Mexico in the near future, but details were unclear. It was unknown.
President Trump said his team was considering tariffs of around 25% that could be announced on February 1, but gave no other details.
The comments came as a surprise, given that officials had previously suggested that the new taxes would be imposed in a “measured” manner and would be a significant relief for trade-exposed currencies. The next memo simply directed government agencies to investigate and correct persistent trade deficits.
“A 25% tariff seems high to start, but the market reacted quickly, especially in currency,” said Shoki Omori, chief global desk strategist at Mizuho (NYSE:) Tokyo Securities.
“I think market participants thought that Mr. Trump would start imposing tariffs on China, say 10% to 20%, but gradually increase them.”
The market reaction was a sudden decline in the Canadian dollar and Mexican peso, helping the dollar parity losses suffered on Monday. The dollar rose 1.2% to C$1.4475, while the peso rose 1.3%.
It rose 0.6% to 108.65, down 1.2% overnight and the biggest one-day decline since late 2023.
The euro fell from an early high of $1.0434 to $1.0364. The EU has a large trade surplus with the United States and is seen as a prime target for President Trump's tariffs.
The dollar rose 0.3% to 156.06 yen against the yen, after hitting a five-week low of 154.90 yen.
The yen had strengthened last week on growing expectations that the Bank of Japan would raise interest rates at its policy meeting this Friday.
The dollar also rose 0.3% to $7.2847. President Trump has previously threatened China with tariffs of up to 60%.
