(Bloomberg) — The dollar rallied after posting its biggest drop in 14 months as U.S. President Donald Trump said he could enact 25 percent tariffs on Mexico and Canada in February.

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Bloomberg’s dollar gauge rose as much as 0.7 percent in Asia on Tuesday after falling in New York trade as headlines about new tariffs spurred a rush to the reserve currency. The Canadian dollar and Mexican peso fell about 1% against the greenback on the news.

“If 25% tariffs come to Mexico and Canada, there will surely be bigger tariffs in China shortly after,” National Australia Bank Ltd. strategist Rodrigo Catril said. in sydney “Dollar Has Higher Bargaining Room.”

The dollar’s rise highlights traders’ unease over any news about duties and their impact on the global economy. The heightened volatility made headlines Monday over how the Trump administration would hold off on implementing tariffs immediately after taking office, spurring the $7.5 trillion-a-day currency market.

10-year Treasury yields fell eight basis points on the day to 4.55%, after falling as much as nine basis points earlier. The risk-sensitive Australian and New Zealand dollars also declined.

“Volatility on the back of Trump’s comments will be a regular feature,” said Alvin Tan, strategist at RBC Capital Markets. “Trump likes to pontificate, but he doesn’t always follow through on his comments. But the market can’t ignore them either.”

China’s offshore yuan fell 0.3 percent after gaining more than 1 percent in New York trade as Trump had earlier threatened to impose tariffs on the country’s exports. The People’s Bank of China set the benchmark yuan rate at the strongest level since November 8, in a sign that it is increasing support for the currency.

“Be flexible — that’s the only thing I can think of right now,” Serena Zhou, an economist at Mizuho Securities Asia Ltd., said of currency trading. “It’s too difficult to try to predict the uncertainty,” he said.

–With the help of Jaehyun Eom.

(Updates with analyst commentary in the sixth paragraph.)

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