The Canadian dollar and Mexican peso are spiralling lower this afternoon after US president Donald Trump told reporters in the Oval Office that he would follow through with imposing 25-percent tariffs on the two countries in retaliation for allowing fentanyl smuggling across their borders.

According to some reports, Trump also suggested that he will make a determination on whether oil imports will be covered “this evening”.

The story is still developing, and is clearly triggering stops across currency markets, but may not have staying power: we would caution market participants against overreacting, and will again reiterate our view that tariffs on the scale proposed would do immense damage to all three North American economies. Major questions remain around the scale, scope, and duration of this action, and clear answers are unlikely to be delivered for days or weeks.