The Canadian dollar is underperforming against the Mexican peso amid ongoing tariff disputes following Trump’s presidency. While the loonie has weakened by 0.5% since January 20, the peso has gained 3.5%. Analysts highlight Canada’s greater economic vulnerability to U.S. tariffs under Mark Carney’s leadership, contrasting Mexico’s more conciliatory negotiation strategy. Both nations face challenges, but Mexico appears better positioned in current negotiations.
The Canadian dollar has experienced greater depreciation compared to the Mexican peso amidst the ongoing tariff disputes stemming from the Trump administration. Since January 20, when President Trump was inaugurated, the loonie has decreased by 0.5 percent, while the peso has increased by 3.5 percent against the U.S. dollar. Within a group of 16 major currencies, the Canadian currency is ranked low, indicating its relative weakness.
Several factors have contributed to the Canadian dollar’s more difficult situation. Analysts suggest that Canada’s economy is more vulnerable to tariff pressures, as noted by Nick Rees of Monex Europe Ltd., who stated that “Mexico is better able to offer concessions to the U.S., limiting some of the downside in market reactions.”
The leadership of Mark Carney, the new Prime Minister of Canada, appears to reflect a tougher stance against U.S. tariffs, with commitments from Carney to maintain tariffs until the country earns his regard from the American president. In contrast, Mexico’s President Claudia Sheinbaum has adopted a more reserved position, focusing on constructive negotiation.
Further complicating the Canadian dollar’s position, U.S. Commerce Secretary Howard Lutnick has acknowledged the more measured reactions from the UK and Mexico while criticizing Canada’s retaliatory tariffs. Differentiation in negotiations has allowed Mexico to navigate the tariff crisis with relatively less difficulty, according to analysts from JPMorgan Chase & Co.
There is also potential for Mexico to negotiate favorable terms by reducing imports from China, especially in critical sectors like automobiles and electronics. Analysts forecast optimistic scenarios for Mexico as negotiations with the U.S. progress, which might not be the case for Canada.
Derek Holt from the Bank of Nova Scotia noted that the Mexican peso had already experienced significant adjustment last year due to domestic turmoil, leading to a more stoic current status compared to the Canadian dollar. He mentioned that Mexico’s currency faced a decline of 17 percent since April of the previous year, whereas the Canadian dollar’s drop was less severe at six percent.
Currently, market analysts assert that the Canadian dollar’s depreciation relative to the peso is linked to the harsher implications of U.S. tariff threats directed towards Canada. The prevailing economic uncertainty suggests that the Bank of Canada may need to lower interest rates in response to decreasing consumer and business sentiment.
In summary, the Canadian dollar has faced greater challenges than the Mexican peso as both nations grapple with the impacts of U.S. tariffs. Analysts attribute Canada’s vulnerability to its economic exposure and its governmental stance under new leadership. Comparatively, Mexico’s diplomatic approach has allowed it to maintain a stronger currency position. Overall, the divergent paths of these currencies highlight the complex interplay of international trade relations and economic strategy.
Original Source: financialpost.com
