On Tuesday (November 26), U.S. President-elect Trump once again caused market upheaval by announcing his plan to impose a 25% tariff on imports from Mexico and Canada. This news led to a broad rise in the U.S. dollar against major currencies, with the dollar index surging 0.63% to reach 107.55, recovering all its previous losses.
Trump stated on the social platform Truth Social: "On January 20, as one of my first executive orders as President, I will sign the documents required to impose a 25% tariff on all goods entering the United States from Mexico and Canada." This statement signifies a potential major shift in U.S. trade policy, and the market reacted swiftly to it.
Following the announcement, the U.S. dollar saw a sharp rise of more than 2% against the Mexican Peso, reaching 20.75, the highest level since the U.S. election on November 6, and is currently trading around 20.59. Similarly, the dollar rose 1.37% against the Canadian dollar, reaching 1.4177, the highest since May 2020, before slightly retreating to around 1.4136.
Previously, the market had a lukewarm reaction to Trump nominating hedge fund manager Scott Bessent as U.S. Treasury Secretary, which had softened the dollar. On Monday, the dollar index fell by 0.56%. However, Trump's latest tariff threat quickly altered market sentiment, putting the dollar back in a strong position.
Market analysts believe Trump's tariff plan will have a direct impact on the economies of NAFTA countries, especially Mexico and Canada. Both countries are heavily dependent on the U.S. market for exports, and the increased tariffs could put pressure on their economies. Additionally, this policy might provoke retaliatory measures from trading partners, escalating global trade tensions.
As Trump's official inauguration date approaches, market volatility over his trade policies is intensifying. Investors are closely monitoring further policy moves from Trump's team and whether Congress will support this tariff plan. Meanwhile, the U.S. Treasury market remains focused on Bessent's expected role as Treasury Secretary.
The dollar's strong comeback also adds to future uncertainty in the foreign exchange market, especially with the Federal Reserve's December meeting approaching, requiring investors to react more swiftly to policies and data.
