February 04, 2025 at 04:54AM
At the end of it all, the tariff can gets kicked down the road. Trump pushed the 25% tariffs on Canada and Mexico to a month from now, allowing for trade negotiations to take place in the meantime. His team might be pushing the narrative that with Canada, it’s a fentanyl issue. However, most of his disdain towards Canada seems to be on trade. So, go figure.
As things stand, all there’s left is that 10% tariffs on China – at least in this opening salvo. But Trump did say that there would be talks with Xi “probably in the next 24 hours”. So, we’ll see.
But for now at least, markets can look to catch their breath. The tariff threats are no doubt still in the picture but it also shows how Trump loves to play out his political agenda. Go big and loud in the opening gambit before trying to extract concessions after. And when a deal gets struck, it’ll be “the best deal in history for the US”. Sounds familiar, eh?
The dollar is seeing a little bounce back on the day but not after having seen gains evaporate in trading yesterday. The greenback opened with a gap higher across the board but as Trump relented on tariffs, that gap higher was erased. A look at USD/CAD:
As Trump calls it a day and heads to bed, markets will be able to catch a breather in European trading today. That’s somewhat similar to yesterday. The only difference is that broader markets will surely feel better about the current position as opposed to the “all hell is about to break loose” possibility yesterday.
As such, risk trades might find some incentive to push higher but it’s still quite a tricky landscape.
With Canada and Mexico now joining the negotiating table, Trump will look to the EU and China next. And those are likely to be tougher propositions to muster.
His erratic nature means that you never know when he’s going to start to reignite tariff threats on that front. And it will keep market players more guarded than they were at the start of the year at least.
This article was written by Justin Low at www.forexlive.com.
