Market Wire: Relief Rally Smashes Into Wall After Trump Renews Tariff Threats

The Canadian dollar and Mexico peso are plunging against the greenback, equity futures are reversing lower, and Treasury yields are climbing after President Trump doubled down on tariff threats against the two countries during a signing ceremony in the Oval Office. “We’re thinking in terms of 25 percent on Mexico and Canada,” he told reporters, before saying “I think we’ll do it February 1”.

The loonie is down roughly 1 percent amid thin liquidity conditions at the moment, and could break lower in the coming hours as key psychological levels are bypassed. The peso is down a little over 1.2 percent.

We would caution against overreaction. Tariffs on the scale proposed would almost certainly inflict substantial damage on the US economy, financial markets, and the political prospects of the Republican party itself. A more nuanced approach remains the most likely long-term base case, and tonight’s moves could easily reverse in the coming days and weeks.

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