he U.S. dollar rose on Tuesday after Donald Trump said he would impose tariffs on products coming into the United States from Mexico, Canada and China.
Investors braced for policies that could set the stage for a trade war.
In an initial knee-jerk reaction to Trump’s comments, the dollar jumped more than 2% against the Mexican peso and hit a four-and-a-half-year high against its Canadian counterpart.
The U.S. currency also rose to its highest level since July 30 against China’s yuan. Other currencies also fell against the dollar but pared loss by mid-afternoon in Asia.
Ben Bennett, Asia-Pacific Investment Strategist at Legal And General Investment Management, said investors have so far focused on market-positive policies under Trump such as tax cuts and deregulation since the election, but that it is arguably quicker for him to implement his more challenging policies, such as higher tariffs.
“This announcement serves as a wake up call.”
The dollar has been on the back foot over the past couple of days as U.S. Treasury markets cheered Trump’s pick of hedge fund manager Scott Bessent for U.S. Treasury Secretary.
