Peso to weaken as Trump slaps tariffs on China, Mexico, Canada

THE PESO could weaken against the dollar this week after US President Donald J. Trump slapped tariffs on Canada, Mexico, and China.

The local unit closed at P58.365 per dollar on Friday, dropping by 8.5 centavos from its P58.28 finish on Thursday, Bankers Association of the Philippines data showed.

Week on week, the peso declined by 5.5 centavos from its P58.31 finish on Jan. 24.

“Tariff threats from Trump on Mexico and Canada triggered the dollar’s upside,” a trader said by phone interview on Friday.

The peso declined after the Philippine Stock Exchange index (PSEi) dropped to bear market territory on Friday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

On Friday, the PSEi fell by 4.01% or 245.07 points to 5,862.59, while the broader all shares index lost by 2.19% or 79 points to 3,520.32.

This was the benchmark’s lowest close in 27 months or since the 5,853.63 finish on Oct. 12, 2022. This also put the PSEi in bear territory as this marked a decline of more than 20% from its latest recorded peaks, which are the 7,604.61 intraday high and the 7,554.68 close on Oct. 7, 2024.

For this week, the peso will likely decline further after Mr. Trump on Saturday announced the implementation of tariffs on Canada, Mexico, and China starting Tuesday.

The trader said the peso could move between P58.20 and P58.60 this week, while Mr. Ricafort sees it ranging from P58.10 to P58.60.

Mr. Trump on Saturday ordered sweeping tariffs on goods from Mexico, Canada and China, demanding they stanch the flow of fentanyl — and illegal immigrants in the case of Canada and Mexico — into the United States, kicking off a trade war that could dent global growth and reignite inflation, Reuters reported.

Mexico and Canada, the top two US trading partners, immediately vowed retaliatory tariffs, while China said it would challenge Mr. Trump’s move at the World Trade Organization and take other “countermeasures.”

In three executive orders, Mr. Trump imposed 25% tariffs on Mexican and most Canadian imports and 10% on goods from China, starting on Tuesday.

He vowed to keep the duties in place until what he described as a national emergency over fentanyl, a deadly opioid, and illegal immigration to the US ends.

A White House fact sheet said the tariffs would stay in place “until the crisis alleviated,” but gave no details on what the three countries would need to do to win a reprieve.

The tariff announcement makes good on Mr. Trump’s repeated threat during the 2024 presidential campaign and since taking office, defying warnings from top economists that a new trade war with the top US trade partners would erode US and global growth, while raising prices for consumers and companies. — A.M.C. Sy with Reuters