07:15 AM EST, 11/29/2024 (MT Newswires) -- The Mexican peso (MXN) and the CAD took a round trip this week, with both currencies initially falling on Tuesday when United States President-elect Donald Trump said he would slap Canada and Mexico with a 25% tariff on the first day of his presidency, noted UBS.

However, the two currencies subsequently reversed much of their losses, after Canadian Prime Minister Justin Trudeau and Mexico President Claudia Sheinbaum both signaled that they will tackle the issues raised by Trump, and the US president-elect claimed victory for the "very productive" conversation he had with Sheinbaum, wrote the bank in a note to clients.

In the view of UBS, the rapid escalation and de-escalation show the transactional nature of Trump's tariff policy, and also that tariff threats can potentially be followed by unexpectedly quick de-escalations.

That said, the quick relief for Mexico and Canada might not last as tackling migration and drug issues is quite separate from the still large trade imbalances between the US and these two economies, pointed out the bank.

As such, UBS wouldn0t be surprised to see renewed tariff threats on these -- and other) countries in the coming months/quarters.