US President Donald Trump announced that tariffications on imports from Canada and Mexico will proceed when a one-month delay ends next week. He confirmed this during a joint press conference with French President Emmanuel Macron.

As of the latest data, the USD/CAD currency pair showed a decrease of 0.01%, trading at 1.4270. Tariffs, which are customs duties on imported goods, are implemented to enhance the competitiveness of local producers.

In 2024, Mexico, China, and Canada accounted for 42% of US imports, with Mexico being the leading exporter at $466.6 billion. Trump plans to use revenues from these tariffs to reduce personal income taxes.

When Donald spoke alongside Emmanuel, he reiterated what markets had already suspected—the additional levies on goods from the neighbouring nations would not be postponed any further. Traders had priced in some level of uncertainty over whether the delay could be extended, but his statement removed that doubt.

With the US dollar barely moving against the Canadian counterpart following this, we see that currency markets had largely braced for this decision. A drop of just 0.01% suggests that traders were already positioned for the tariffs to be implemented. This also indicates that unless further details emerge or an unexpected policy shift arises, exchange rates may not react markedly in the immediate term.

Looking at the trade figures, the reliance on goods from these three markets cannot be overstated—nearly half of all foreign purchases came from Mexico, China, and Canada last year. Mexico’s lead position at $466.6 billion underscores why any shifts in trade policy with the country will inevitably have repercussions across multiple sectors.

Donald’s intention to allocate tariff revenues towards reducing personal income taxes adds another element to the discussion. If implemented as suggested, the effects could be twofold: potential relief for households but also the possibility of inflationary pressure if businesses pass the added costs on to consumers. It will be important for traders to watch for any confirmation of how these tariff collections are used, as signals on tax policy could shape expectations around consumer spending and business investment.

We should also consider the knock-on effects of this approach. If the administration depends on tariffs to offset tax reductions, changes in trade volumes could directly impact the amount collected. If imports fall due to these higher rates, revenue projections might not align with actual collections. This could lead to adjustments in fiscal policy, which markets would need to assess carefully.

With these factors in motion, derivative traders should track shifts in sentiment closely. Option pricing on affected currency pairs, commodities that rely on cross-border supply chains, and even equity markets tied to international trade will be areas where volatility could surface. Watching for any immediate retaliatory measures from Canada or Mexico would also be advisable, as such moves could introduce rapid shifts in pricing.