Trump’s tariff threat marks start of currency market rout | Wilnesh News

President-elect Trump’s vow to impose additional tariffs on China, Canada and Mexico on his first day in office marked the start of a currency market frenzy, strategists said, warning investors of the risks of underestimating the impact on currencies.

trump card explain On Monday, he will sign an executive order on January 20 to impose 25% tariffs on all goods from Canada and Mexico, a move that may violate the terms of regional free trade agreements.

The former president had previously called Tariff “the most beautiful word in the dictionary”, also explain He plans to impose an additional 10% tariff on all Chinese products entering the United States

The announcements triggered a knee-jerk reaction in currency markets, with the greenback rising more than 2% against the U.S. dollar Mexican Peso and hit a four-year high Canadian dollar.

“I think the first reaction from investors should be to prepare for wild swings in FX volatility,” said Kamakshya Trivedi, global head of research for FX, rates and emerging market strategies. Goldman Sachs.

The U.S. dollar index, which measures the greenback against six major currencies, was little changed at 106.79 at noon London time on Tuesday. The index closed down 0.6% in the previous session as investors welcomed hedge fund manager Scott Bessent as Trump’s nominee for U.S. Treasury secretary.

The euro and sterling both edged higher against the dollar.

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Goldman Sachs’s Trivedi said investors should prepare for wild swings in currency markets in the coming months, but that in the longer term, tariffs are likely to be a prominent feature of Trump’s return to the White House.

Trivedi said investors face some unknowns, noting the extent to which Trump’s tariffs could simply be used as a negotiating tool, whether they reflect a “maximalist” stance or whether the effects of the tariffs have already been used as a negotiating tool. financial markets digested.

“But I do think at the end of the day we’re going to see increased tariffs on some economies, primarily China, and I think that’s going to trigger a stronger dollar reaction on a broad basis,” Trivedi said.

The former president’s tariff announcement, made via the social media platform Truth Social, fell well short of some of his campaign promises, but strategists remained cautious about the potential for further announcements and the prospect of retaliatory measures.

Trump has previously suggested he could implement a package Imposing a 20% tariff on all goods imported into the United States, including up to 60% tariffs on Chinese products, one Up to 2,000% Applies to vehicles made in Mexico.

Luca Paolini, chief strategist at Pictet Asset Management, said in an interview with CNBC’s “Squawk”: “The market seems to expect that this trade war is actually just a long negotiation process and the United States will get something. And China, Europe and Mexico may have to pay something.

He added: “The point we’re making here is that Trump is likely to impose significant tariffs and there will be a lot of pressure on China and Europe, and we know how this is going to end.”

Strategist at ING, ABN AMRO explain While Trump’s tariff threat may be seen as a negotiating tactic before he takes office in January, there is a risk that investors underestimate its impact on currency markets on Tuesday.

“While most in the market believe Trump will use tariffs as a bargaining stick – in this case to tighten US border controls – we would be cautious to Its market impact is regarded as sensationalism.”

“If 25% tariffs are about to hit Mexico, USD/MXN will be a 24/25 story, not just 21. We already think that the currencies of Mexico and Canada will face tougher Trump 2.0 policies than they did in 2.0 .