Mexican Peso, Canadian Dollar Slide As Ackman Says Trump Will Use Tariffs 'As A Weapon'

President-elect Donald Trump dropped an economic bombshell Monday, announcing plans to slap hefty tariffs on key U.S. trade partners once he returns to the White House on Jan. 20.

Trump pledged 25% tariffs on all Mexican and Canadian imports and an additional 10% levy on Chinese goods, which would remain in place until drugs, and in particular fentanyl, will stop entering the U.S.

“Thousands of people are pouring through Mexico and Canada, bringing crime and drugs at levels never seen before,” Trump wrote on Truth Social.

“On January 20th, as one of my many first executive orders, I will sign all necessary documents to charge Mexico and Canada a 25% tariff on ALL products coming into the United States. This tariff will remain in effect until such time as drugs, in particular Fentanyl, and all illegal aliens stop this Invasion of our country!”

Markets React: Peso And Loonie Hit Hard

Currency markets were the immediate shock absorber of the news. The Canadian dollar, tracked by the Invesco CurrencyShares Canadian Dollar Trust FXC, nosedived 0.8%, breaching the 1.41 level against the U.S. dollar — a low not seen since April 2020.

The Mexican peso didn't fare much better, sliding 0.9% to 20.50 against the greenback, while the Chinese yuan slumped 0.4% to a four-month low.

Robin Brooks, economist at the Brookings Institution, warned that this may only be the beginning. "The Mexican Peso is down 1.5% after tonight’s tariff news from the president-elect. To put this fall in perspective, the Mexican peso fell 10% in just a few days right after Trump's surprise win in 2016. So this fall is small and only the beginning of a sorely needed repricing."

The iShares MSCI Mexico ETF EWW fell 1.5% in premarket trading on Tuesday.

James Thorne, a market strategist at Wellington Altus, questioned the practicality of Trump's rhetoric. "Do you really think Mr. Trump will put a 25% tariff on Canadian Sour Crude Oil?" Thorne wrote. "Recall it's mixed with Sweet Shale oil and then refined. Constraint of US refining capacity. Think about that for 1 minute."

China In The Crosshairs: Fentanyl And Tariffs

Trump renewed his criticism of China, blaming the country for America's fentanyl epidemic.

“I have had many talks with China about the massive amounts of drugs, in particular Fentanyl, being sent into the United States—But to no avail," Trump said.

He accused Chinese officials of failing to deliver on promises to crack down on drug dealers, stating, "Until such time as they stop, we will be charging China an additional 10% tariff, above any additional tariffs, on all of their many products coming into the United States of America."

The tariffs, according to Trump, would serve as a dual-purpose weapon: curbing illegal drug imports and bolstering his "America First" economic policy.

Bill Ackman: Trump Is Using Tariffs As Weapon

Prominent investor Bill Ackman chimed in on X (formerly Twitter), suggesting that Trump's tariffs are less about trade and more about leverage.

"To be clear, according to Trump, the 25% tariffs will not be implemented, or if implemented will be removed, once Mexico and Canada stop the flow of illegal immigrants and fentanyl into the U.S.," Ackman said.

"In other words, Donald Trump is going to use tariffs as a weapon to achieve economic and political outcomes which are in the best interest of America, fulfilling his America First policy."

To be clear, according to Trump the 25% tariffs will not be implemented, or if implemented will be removed, once Mexico and Canada stop the flow of illegal immigrants and fentanyl into the U.S.

In other words, @realDonaldTrump is going to use tariffs as a weapon to achieve… https://t.co/61oQvCpW92

— Bill Ackman (@BillAckman) November 26, 2024

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