US President Donald Trump has escalated trade tensions with Canada again after threatening to impose "severe" tariffs on fertilizer exports from the country. The threat was made at a White House event, where Trump also announced a multi-billion dollar aid package for US farmers affected by his own tariff policies.

Previously, the Trump administration had already imposed broad tariffs on Canadian and Mexican imports as part of the 2025 trade war, with Canadian fertilizer receiving preferential treatment in the form of lower tariffs but still subject to additional duties on volumes above certain quotas within the trade agreement.

From a financial market perspective, the threat of new tariffs on Canadian fertilizer has the potential to put pressure on commodity currencies like the Canadian dollar, while also triggering volatility in the US dollar. On the one hand, trade tensions and concerns about trade flows could boost demand for the US dollar as a global liquid asset, but on the other hand, inflationary risks from rising fertilizer and food costs could add uncertainty to future Fed policy.

Situations like this typically favor gold as a safe-haven asset, as investors seek a hedge against potential increases in production costs, pressure on global growth, and weakening confidence in the stability of trade policies.

More broadly, Trump's move to target fertilizers, a crucial component of the agricultural sector, risks increasing food production costs in various countries and triggering price pressures globally. In the medium term, this could disrupt supply chains, squeeze agricultural margins, and increase pressure on developing economies that rely heavily on imported raw materials.

If the trade conflict with Canada and Mexico escalates, global stock markets could potentially respond with risk-off sentiment, while capital flows could shift to safe assets like U.S. government bonds and gold, reinforcing the narrative of uncertainty already established by the trade war and aggressive tariff policies of the Trump era.

Source: Newsmaker.id