By Ankur Banerjee

SINGAPORE (Reuters) -The U.S. dollar surged against major rivals on Tuesday after President-elect Donald Trump said he would sign an executive order that would impose tariffs on products coming into the United States from Mexico, Canada and China.

The comments spurred a rally in the dollar, with the greenback rising nearly 2% against the Mexican peso and hitting a four-and-a-half-year high against its Canadian counterpart.

The U.S. currency also rose to its highest level since July 30 against China’s yuan.

The dollar was on the back foot over the past few days as U.S. Treasury markets cheered Trump’s pick of hedge fund manager Scott Bessent for U.S. Treasury secretary.

While traders see Bessent as an old Wall Street hand and fiscal conservative, he has also openly favoured a strong dollar and supported tariffs. Analysts suggested market reaction to the choice will likely be short lived.

“It feels like we’ve just had a time warp back to 2016,” said Jason Wong, senior market strategist at BNZ. “The market is going to be twitchy… You can jump to conclusions but I wouldn’t be jumping to anything at the moment so the market just needs to get a grip.”

Trump said that on his first day in office he would impose a 25% tariff on all products from Mexico and Canada.

On China, the president-elect said Beijing was not taking strong enough action to stop the flow of illicit drugs crossing the border into the U.S. from Mexico by curbing the export of drugmaking ingredients.

“Until such time as they stop, we will be charging China an additional 10% Tariff, above any additional Tariffs, on all of their many products coming into the United States of America,” Trump said.

China has previously denied the allegations.

The Australian dollar sank to a more than three-month low of $0.64335 in early Asian hours and was last down 0.41% at $0.6478. The Aussie is often sold as a liquid proxy for the yuan given China’s status as Australia’s biggest trading partner. [AUD/]

New Zealand dollar touched a one-year low of $0.5797 and was last down 0.38% at $0.5823.

Ben Bennett, Asia-Pacific Investment Strategist at Legal And General Investment Management, said investors have so far focused on market-positive policies under President-elect Trump like tax cuts and deregulation since the election, but that it is arguably quicker for him to implement his more challenging policies such as higher tariffs. “This announcement serves as a wake up call.”

“Tariffs should be good for the U.S. dollar and bad for currencies that are being tariffed as trade balances shift, but I’m not sure Trump’s government will be happy to let that trade accelerate.”

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