The dollar rose, recovering some of Monday's losses, after President-elect Donald Trump announced his intention to impose more tariffs on major trading partners.
The Chinese offshore yuan fell 0.4% against the US dollar after Trump said he would impose an additional 10% tariff on Chinese goods. He also pledged to impose a 25% tariff on all products from Mexico and Canada, sending their currencies down by more than 1% each.
“Trader sentiment towards risk is currently under pressure due to the risk of Trump’s tariffs. The dollar is seen as a safe haven, while currencies of affected countries, such as the Mexican peso, are taking a hit. This could be just a taste of what’s to come,” said Mingz Wu, a currency trader at StoneX Financial.
Trump’s posts on his Truth Social platform were an early reminder of the volatility of his comments. During his first term as president, his social media comments sent markets into a tailspin, disrupting business schedules and unnerving investors around the world.
Trump claimed in his Monday posts that China had failed to deliver on its promises to implement the death penalty for fentanyl dealers, writing: “Drugs are flowing into our country, mostly through Mexico, at levels we have never seen before.”
“Brace yourself, Trump is likely to demand something from Mexico,” said Benito Perber, chief economist for the Americas at Natixis. “While investors were expecting a big threat from Trump, the Mexican currency will take a big hit.”
