As of today, the United States has imposed tariffs on Mexico and Canada at a rate of 25%, along with an additional 10% in sanctions on China, where tariffs already stand at 20%. However, currency pairs linked to all three economies—USD/MXN, USD/CAD, and USD/CNH—do not appear particularly weak in response to this significant risk, especially for Mexico and Canada, whose economies are heavily reliant on the U.S. market.
- The general economic consensus suggests that both Mexico and Canada could fall into recession if the new U.S. administration maintains this tariff policy for an extended period. However, the market still seems reluctant to believe that these tariffs will remain in place for the long term, anticipating a trade agreement eventually being reached. If the outlook turns less optimistic, further gains in USD/CAD and USD/MXN could follow.
- China retaliated against the U.S. tariffs by announcing 10%-15% increases on import levies covering a wide range of American agricultural and food products, while also imposing export and investment restrictions on twenty-five U.S. firms. However, the market has not interpreted this response as an aggressive escalation.
- Meanwhile, Canada has stated its readiness to impose 25% tariffs on approximately C$30 billion worth of U.S. goods in an initial tranche. Furthermore, Canada has signaled its willingness to extend these tariffs to imports valued at a total of C$155 billion, while also announcing a halt on nickel exports to the United States.
USDCNH
The Chinese yuan is strengthening against the dollar today. Although China has criticized the U.S. tariff approach, it has not responded in a fully proportional manner. As a result, the final economic impact may be smaller than expected, and for now, the likelihood of further U.S. tariff hikes appears limited.
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USDCAD
The Canadian dollar is giving back some of its recent gains today, but the move remains moderate considering the risk posed by prolonged tariffs. While USD/CAD is up more than 0.4%, it is still difficult to characterize the move as a broad-based selloff.
Source: xStation5
USDMXN
Similarly, the Mexican peso is struggling to regain strength after its sharp gains in 2024. However, it is currently the weakest of the three currencies, losing ground against the dollar. USD/MXN is up nearly 0.7% today.
On the MACD indicator, a potential bullish signal is emerging as the moving averages cross upward, while the pair has also broken above the EMA50 level.
Source: xStation5
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