Tariff Threat Sinks MXN, CAD – Scotiabank
|So much for tariff gradualism under a Treasury Sec. Bessent. President-elect Trump’s threat delivered late last night to lump 25% tariffs an all goods from Canada and Mexico as well as additional tariffs on Chinese goods from ‘day one’ of his presidency has roiled FX markets, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
USD mixed versus majors as markets adjust to US priorities
“The CAD and MXN are today’s clear underperformers among the major currencies while the CNY is only marginally lower after the PBoC set a yuan fixing reference rate that was little changed from recent settings. The DXY itself is actually trading lower on the day overall, however, as the likes of the EUR and JPY stage a modest relief rally for—so far—not coming under the president-elect’s crosshairs. Stocks in Asia and Europe are lower while US equity futures are firmer.”
“Global bonds are mostly firmer except Treasurys and Gilts which have eased slightly on the session. The national security grounds for the tariffs cited by Trump (borders, drugs) provide him with cover to impose tariffs under executive order as soon as he is sworn in. Canada, Mexico and China have a few weeks perhaps to persuade the incoming administration that they are taking steps to address their concerns and avoid action. Significantly weaker levels for the CAD and MXN seem very likely if tariffs are actually imposed.”
“It should be clear that tariffs will be the big stick that Trump 2.0 walks with and Europe and Japan should not rest too easy. The USD may edge a little lower in broad terms in the short run but scope for deep or sustained losses look even more limited as tariff risks loom. The US data run picks up a bit this morning but it is mostly second-tier stuff—housing, consumer confidence and the November Richmond Fed Manufacturing Index. The November 7 FOMC minutes are released at 14ET may reflect a degree of caution over the policy outlook after the latest easing moves.”
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