USD/CAD and USD/MXN Forecast: Trump Tariffs to Start this Weekend?

Trump Tariff Key Takeaways

Trump announces he will enact 25% tariffs on Canada and Mexico and increase tariffs on China by 10% effective this weekend.
Tariffs are likely to drive import prices higher, boosting inflation and potentially complicating keeping Fed interest rates higher for longer.
With Canada’s (lame duck) Prime Minister Justin Trudeau vowing to counter U.S. tariffs, retaliation may be imminent – I discuss what it means for USD/CAD and USD/MXN below.

Trump’s Tariff Bombshell

The Trump administration has officially confirmed that new tariffs will take effect on Saturday, February 1, including a 25% tariff on imports from Canada and Mexico and a 10% tariff on Chinese goods. In an official briefing, White House spokesperson Karoline Leavitt denied speculation of a delay, reinforcing that these tariffs will be implemented in full on the US’s top three trade partners, though after the events of the past week, no policy is certain until it's officially signed and enacted.

Trade War Fears and Economic Implications of Tariffs

Trump’s decision is being framed as a response to a failure to crack down on illegal immigration by Mexico and Canada (in China’s case, they’re ostensibly attributed to illegal fentanyl trafficking), but many investors believe he wants leverage to renegotiate the USMCA trade deal that replaced NAFTA in Trump’s first term.

From a broad macroeconomic perspective, tariffs are likely to drive import prices higher, boosting inflation at a time when Trump rode a wave of dissatisfaction with rising prices under Biden back into the White House. Needless to say, rising consumer costs could also complicate the Federal Reserve’s path on interest rates, potentially keeping them elevated for longer.

Tariff Response: What’s Next?

With Canada’s (lame duck) Prime Minister Justin Trudeau vowing to counter U.S. tariffs, retaliation may be imminent; notably, almost 75% of Canada’s exports go to the US, amplifying the impact on the Canadian economy.

Markets should brace for intensified trade tensions, rapid shifts or potential gaps in the USD/CAD and USD/MXN exchange rates in particular, and uncertainty that could persist well into the coming months.

Canadian Dollar Technical Analysis: USD/CAD Daily Chart

usdcad_technical_analysis_01312025

Source: TradingView, StoneX

With no hint of a phased-in approach or exemptions announced, traders are selling first and asking questions later when it comes to the Canadian dollar and Mexican peso.

USD/CAD has seen an immediate spike higher to trade above 1.4500 as we go to press, on track for its highest close since the depths of COVID in March 2020. Bulls will want to see the breakout above the 1.4475-1.4500 zone hold into next week to confirm the breakout and open the door for further gains back toward the 22-year highs near 1.4700.

Mexican Peso Technical Analysis: USD/MXN Daily Chart

Source: TradingView, StoneX

Meanwhile, the peso has yet to break out to new yearly highs, though it has erased its intraday losses to trade back above 20.70. The pair remains within an ascending triangle pattern. For the uninitiated, ascending triangle patterns indicate growing buying pressure that most often leads to a bullish breakout and continuation higher, especially if we have a clear fundamental catalyst.

If we do see a clean breakout above 20.85, there’s little in the way of technical resistance until closer to 2021 highs around 22.00.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.