Canadian dollar falls to one-month low as Trump confirms 25 percent tariffs on Canada and Mexico
The Canadian dollar weakened to a one-month low on Monday after Donald Trump confirmed that 25 percent tariffs on imports from Canada and Mexico would take effect on Tuesday.
According to BNN Bloomberg, the loonie dropped 0.5 percent to 1.4535 per US dollar, or 68.80 US cents, reaching its lowest level since February 3, when an earlier tariff deadline caused traders to sell off the currency.
Trump stated there was no possibility for Canada or Mexico to negotiate an exemption.
The confirmation dashed market expectations for concessions, whether in the form of another delay or a lower tariff rate.
“Markets had expected some concessions — either another punt or a lower-than-25 percent tariff rate,” said Shaun Osborne, chief currency strategist at Scotiabank.
Traders had widely assumed the tariffs would be postponed or softened, but Trump’s remarks sent financial markets into uncertainty.
Canada, which sends approximately 75 percent of its exports to the United States, now faces greater trade uncertainty.
The S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) fell to 47.8 in February from 51.6 in January, dropping below the 50.0 mark for the first time since August, as firms reacted to an increasingly uncertain trade outlook.
The Globe and Mail noted that Canadian businesses had become the most pessimistic since the start of the COVID-19 pandemic.
Canadian bond yields fell as investors anticipated a Bank of Canada interest rate cut. The yield on the 2-year bond declined 8 basis points to 2.493 percent, its lowest level since February 3, Reuters reported.
The Mexican peso also saw losses, sliding 0.9 percent to 20.75 per US dollar, its weakest level since the previous tariff deadline in early February, BNN Bloomberg reported.
The Bloomberg Dollar Spot Index initially dropped but trimmed losses to close down 0.4 percent.
Oil markets reacted to trade tensions, with US crude oil futures falling nearly 2 percent to $68.37 per barrel.
The decline followed reports that OPEC+ would move forward with a planned oil output increase in April, adding to concerns that a prolonged trade conflict could weaken the global economy.
