By Kevin Buckland
TOKYO (Reuters) – China’s yuan slumped to a record low in offshore trading on Monday, while Mexico’s peso and Canada’s dollar tumbled to multi-year troughs after U.S. President Donald Trump slapped the countries with tariffs, triggering fears of an escalating trade war.
The U.S. dollar’s gain was broad, with the euro also dropping to a more than two-year low and the Swiss franc – despite typically acting as a safe haven – sliding to the weakest since May.
Canada and Mexico immediately vowed retaliatory measures, and China said it would challenge Trump’s levies at the World Trade Organization.
Cryptocurrency bitcoin fell back below $100,000 to its lowest in nearly three weeks.
“The surprise for markets … is that Canada and Mexico retaliated immediately and that others, i.e. China and the EU, may follow their lead, resulting in a sharp contraction in global trade,” said Tony Sycamore, a market analyst at IG.
“The starting date of U.S. tariffs on Canada, Mexico and China of Feb. 4 was also much sooner than many had anticipated.”
As Trump had promised last month, the United States hit Canada and Mexico with duties of 25% and China with a 10% levy, calling the measures necessary to combat illegal immigration and the drug trade.
The tariffs, outlined in three executive orders, are due to take effect 12:01 a.m. ET (0501 GMT) on Tuesday.
Trump’s move was the first strike in a what could be a destructive global trade war that would result in a surge in U.S. inflation that would “come even faster and be larger than we initially expected,” said Paul Ashworth of Capital Economics.
The U.S. dollar advanced 0.7% to 7.2552 yuan in the offshore market early in Asia’s morning, having earlier pushed to the record high of 7.3765 yuan.
The U.S. currency climbed 2.3% to 21.15 Mexican pesos, crossing the 21-peso line for the first time since July 2022, and rose 1.4% to C$1.4755, a level not seen since 2003.
The euro plunged as much as 2.3% to $1.0125 – the lowest level since November 2022 – before recovering some composure to change hands at $1.0259. Europe is also potentially in Trump’s tariff crosshairs.
The greenback added as much as 1.1% to 0.9210 Swiss franc, the highest since last May, before trading at 0.9142 franc.
Sterling fell 0.8% to $1.23.
Japan’s yen was more resilient, trading flat at 155.25 per dollar.
Bitcoin was last about 4.4% lower at $97,622.
(Reporting by Kevin Buckland; Editing by Jamie Freed)