Trump's tariff "backfire" stirs up the foreign exchange market, with the dollar index recording its biggest single-day increase in three weeks.

After President Trump confirmed that he will impose a 25% tariff on Canada and Mexico next week, foreign exchange traders have been buying US dollars. This led to Bloomberg's US Dollar Index recording its largest increase in three weeks on Thursday, while the Mexican peso and Canadian dollar both fell after Trump announced this news. It is reported that on February 27 local time, Trump announced that the plan to impose tariffs on Mexico and Canada will proceed as scheduled, with both countries facing a 25% tariff on March 4. This is Trump's first major tariff action in his second presidential term, which could disrupt global supply chains, reignite inflation, and slow down economic growth. As early as February 1, Trump signed an executive order stating that imports from Mexico and Canada would face a 25% tariff (with a 10% increase for Canadian energy products). However, on February 3, after negotiations with Mexican President Obrador and Canadian Prime Minister Trudeau (where both countries agreed to strengthen border control), Trump suspended the tariff plan. He announced a 30-day delay in the implementation of tariffs on both countries and continued negotiations, with the tariff measures set to take effect on March 4. Kyle Chapman, a foreign exchange market analyst at Ballinger Group, said, "Many people say that the market has been indifferent to each tariff report, but today's situation is not the case." Since Trump's participation in the US presidential election, buying US dollars has been a cornerstone of the so-called "Trump trade." After Trump's victory in November last year, the US dollar saw a strong upward trend. Investors believed that Trump's planned external tariffs, internal tax cuts, deregulation, and other measures could boost US inflation, support the US dollar, and US bond yields. However, in recent weeks, as investors grew tired of Trump's inconsistent statements and concerns about the negative impact of tariffs on economic growth, the US dollar's upward trend has receded. From November 5 last year to January 15 this year, the Bloomberg US Dollar Index rose by about 4.5%; since January 15, the index has fallen by about 1.5%. Helen Given, a foreign exchange trader at Monex, said, "If these tariffs actually take effect, we may see further increases in the Bloomberg US Dollar Index, but it is important to note that these tariffs may not be permanent." "While volatility is inevitable, the sustained strength of the US dollar is not guaranteed." XP Investimentos strategist Marco Oviedo also said, "The (tariff) whole idea is seen as a tool to reach agreements on other issues." However, other sentiment indicators in the derivatives market suggest that traders are hedging against the risk of significant devaluation of currencies of economies targeted by Trump's trade policies. An indicator tracking expectations of recent depreciation of the Canadian dollar soared on Thursday, potentially reaching its most bearish closing price since February. The options market is also starting to reflect greater volatility.