SYDNEY- The dollar pared some overnight losses on Tuesday after US President Donald Trump suggested the United States could impose tariffs on Canada and Mexico in the near future, challenging suggestions his policies would be more gradual.
Trump told reporters his team was thinking of tariffs around 25 percent that could be announced on Feb. 1, but offered no other specifics. He also floated the idea of universal tariffs, but said the United States was not ready for that yet.
The dollar had fallen sharply on Monday after Trump’s first day included no specific plans on tariffs and officials signaled any new taxes would be imposed in a “measured” way, a major relief for trade-exposed currencies.
A following trade memo merely directed agencies to investigate and remedy persistent trade deficits.
A tariff of “25 percent looks high as a starter, and markets reacted quickly, especially in FX”, said Shoki Omori, chief global desk strategist at Mizuho Securities in Tokyo.
“I think market participants thought Trump would start with China, with say a 10-20 percent tariff on goods but gradual increase.”
The market reaction was a knee-jerk fall in the Canadian dollar and Mexican peso. The dollar climbed 0.6 percent to 1.4397 Canadian dollar and added 0.9 percent on the peso
The dollar index edged up 0.2 percent to 108.210, having shed 1.2 percent overnight in what had been the sharpest daily loss since late 2023.
The euro eased back to $1.0389 from an early top of $1.0434. The EU runs a sizeable trade surplus with the United States and has been seen as a major target for Trump’s tariffs.
