Kevin Hassett, an economic advisor to the White House, conveyed optimism about trade relations with Canada and Mexico during a CNBC interview. He mentioned that reciprocal tariffs will commence on April 2nd, and negotiations are ongoing with both countries.
Hassett noted that progress has been made on border control and fentanyl issues, contributing positively to tariff policy discussions. However, he acknowledged there may be uncertainty leading up to April, yet expected markets would respond favourably to the tariff policy thereafter.
Concerns About Vat Taxes
Concerns remain regarding the potential classification of VAT taxes as tariffs, which some view as unreasonable. Additionally, the USD/CAD currency pair fell by 39 pips, marking its lowest level in a week.
Hassett’s comments reflect confidence in the current trade discussions, particularly regarding key North American partners. Negotiations are ongoing, and while progress is being made on border security and fentanyl-related matters, uncertainties remain as the deadline for reciprocal tariffs approaches. Markets do not always react predictably in the face of such developments, but Hassett appears to expect a more stable or even positive reaction once the trade policy takes effect.
The mention of VAT taxes introduces another layer of complexity, as some argue that categorising them as tariffs would be unreasonable. If this classification were to gain traction, broader implications could arise for future trade agreements, potentially affecting market expectations. The reaction in the currency market suggests that traders have already started adjusting their positions accordingly, as seen in the movement of the USD/CAD pair.
A 39-pip decline within a week-long range may not seem overly dramatic to some, but in the context of ongoing negotiations, it demonstrates tangible market sensitivity. Short-term fluctuations aside, the real focus should be on how pricing momentum unfolds as April approaches. Any further declines in the exchange rate would suggest increasing concern, while a reversal could imply traders are reassessing the effects of the tariff situation.
Market Reaction And Expectations
With a specific deadline now in place, market participants need to remain attentive to any updates on trade policies or classification issues. We understand that volatility often increases when uncertainty exists around policy implementation, and in this case, traders must be particularly aware of any unexpected changes. If discussions regarding VAT taxes escalate, that alone could introduce additional market swings.
Beyond the immediate reaction in currency markets, those watching closely will also need to track whether tariff expectations influence broader sectors. Hassett’s optimistic tone aligns with efforts to present ongoing talks as a net positive, but unresolved concerns mean traders should prepare for a mix of reactions in the coming weeks.
