08:07 AM EST, 02/27/2025 (MT Newswires) -- The euro (EUR) has continued to trade at modestly weaker levels overnight Wednesday resulting in EUR/USD falling to a low of 1.0459, said MUFG.

It follows comments Wednesday from United States President Donald Trump who once again threatened to implement higher tariffs on imports from the European Union, wrote the bank in a note to clients. When questioned about his plans for EU tariffs at his first cabinet meeting Wednesday, Trump stated that "we have a made a decision and we'll be announcing it very soon. It'll be 25% generally speaking, and that will be on cars and all other things."

The U.S. president didn't offer any specific details on his proposed tariffs but continued to criticize the EU for "really taking advantage of us in a different way. They don't accept our cars. They don't accept essentially our farm products they use all sorts of reasons why not."

The EU was already a target under President Trump's previous plans for: i) reciprocal tariffs, ii) aluminum and steel tariffs, and iii) automobiles, semiconductors and pharmaceutical tariffs that are scheduled to take effect in the coming months. It isn't clear if President Trump was referring to all those potential tariff hikes when he stated he would implement a 25% tariff hike on the EU generally speaking, added the bank.

At the same time, President Trump created more uncertainty over the potential implementation of 25% tariff hikes on imports from Canada and Mexico, according to MUFG. He had previously planned to implement those tariffs on Feb. 4 with a lower 10% tariff rate for energy imports from Canada but postponed for a month after Canada and Mexico were able to satisfy President Trump's demand for tighter border controls to stop the flow of illegal drugs and immigrants into the U.S.

The deadline for tariffs was pushed back until next Tuesday. However, President Trump stated late Wednesday that those tariffs would now not be implemented until April 2. A White House official had to clarify later on that the deadline for tariffs on Canada and Mexico remained next Tuesday and that President Trump hadn't yet decided whether to grant another extension.

However, the comments from President Trump if taken at face value provide some comfort that tariff hikes are unlikely to be implemented as early as next week. A development that could help to ease downside risks for the Canadian dollar (CAD or loonie) and Mexican peso (MNX) in the week ahead, noted the bank.

Canada and Mexico are currently in negotiations with the U.S. to avoid tariffs being implemented next week. It was reported this week that as part of a potential deal Mexico has been asked to implement higher tariffs on imports from China to address U.S. concerns that China is increasingly using Mexico as a backdoor to export into the U.S. and avoid higher tariffs. It has also been suggested that the review of the USMCA trade deal scheduled for July 1 2026 could be brought forward.

The new date President Trump mentioned of April 2 suggests that Canada and Mexico are more likely to be impacted by other tariff plans such as reciprocal tariffs and/or automobiles, semiconductors and pharmaceuticals rather than the country-specific tariffs. One thing that's clear though is that heightened trade policy uncertainty is bad for growth, said MUFG.