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What a difference a couple of months make.

The Canadian dollar was one of the best performing major currencies against the greenback last year, with a gain of nearly 3 per cent. The Mexican peso by contrast was the worst, underperforming even the UK pound with a 17 per cent decline.

Fast forward four months and the two currencies have traded places. The peso, up 10 per cent so far this year against the dollar, has gone from the back of the class to the front, while the loonie – as the Canadian dollar is colloquially called, is languishing at the bottom after retreating 1.6 per cent.

The reason? Trump and Nafta. If investors had overpriced the risks that Donald Trump’s protectionist stance could have on Mexico’s economy, they have similarly underestimated those same risks for the Canadian economy.

The Loonie shed 1.2 per cent of its value this week and was trading at its weakest level in 14 months on Friday after Washington unexpectedly decided to impose tariffs of up to 24 per cent on softwood lumber imports from Canada and made comments about expanding the measures to include the dairy trade.

The unpredictability of the Trump’s administration’s stance on trade was on further display following reports that the White House was considering withdrawing from Nafta. The White House then announced that it was not pulling out and then hours later warned that the US could still “terminate” its two-decade-old free-trade agreement with its northern and southern neighbours if it did not get a “fair deal” from a renegotiation of the pact.

Meanwhile, Mexico’s export driven economy has also proved to be more resilient than expected and grew by a better than expected 0.6 per cent pace during the first quarter compared to the last three months of the year. Canada’s economy, which was hard hit by the collapse in global crude prices, continue to mount an uneven recovery, with the latest data released on Friday showing growth stalled in February

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