President Donald Trump holds a cabinet meeting on Wednesday, February 26, 2025, in the Cabinet Room. Official White House Photo by Molly Riley.
The Dollar rose after U.S. President Donald Trump confirmed March 04 tariffs are set to proceed.
Writing on Truth Social, Trump said Mexico and Canada would be tariffed at the originally planned 25%, while an additional 10% tariff would be placed on China.
"Drugs are still pouring into our Country from Mexico and Canada at very high and unacceptable levels," he said.
He added:
"A large percentage of these Drugs, much of them in the form of Fentanyl, are made in, and supplied by China."
"We cannot allow this scourge to continue to harm the USA, and therefore, until it stops, or is seriously limited, the proposed TARIFFS scheduled to go into effect on MARCH FOURTH will, indeed, go into effect, as scheduled," he said.
The statement suggests little has been achieved by way of negotiation and that commitments made by Canada and Mexico are simply not enough.
The Dollar is higher in line with the FX playbook that says the more severe the tariffs, the more inflationary and dollar-friendly they are.
The Pound-to-Dollar exchange rate is a third of a per cent lower on the day at 1.2641. However, the Pound is looking relatively insulated, as the Euro-to-Dollar rate is lower by half a per cent.
The Canadian Dollar and Peso are down by similar margins.
"The dollar has surged today after a Truth Social post in which Trump assured markets that the Mexico and Canada 25% blanket tariffs would indeed be implemented on Tuesday. He also threw in an extra 10% on China for good measure," says Kyle Chapman, FX Markets Analyst at Ballinger Group.
Concerning the April tariffs, which are to be applied universally on certain sectors of goods, it also appears there is limited scope for leeway.
"The April second Reciprocal Tariff date will remain in full force and effect. Thank you for your attention to this matter," said Trump.
Foreign exchange markets have become increasingly insensitive to tariff headlines since Trump granted an extension to Canada and Mexico on February 03.
The Canadian Dollar and Peso rallied sharply on the delay as investors saw it as a sign that target countries could negotiate and whittle away at the severity of potential tariffs.
Trump's statement on Thursday could yet be a ploy to get the market's attention and force last-minute concessions from China, Canada and Mexico. However, it also significantly raises the odds that he is not bluffing and will proceed with the stated tariffs.
"A complacency has built up in markets since the first tariff delay, and that always meant that a big correction was on the cards if calling Trump’s bluff turned out to be the wrong move. Before yesterday, the euro was priced as if there was no longer any tariff risk, and Trump appears to be hell-bent on rectifying that this week. Much has been said about the market’s fatigue in responding to each and every tariff headline – that is not what is on display today," says Chapman.