If the value of the Canadian dollar appreciates against the Mexican peso, it can lead to an increase in Mexico's trade deficit, as Canadian goods become relatively cheaper for Mexican consumers without affecting the export prices for Mexican goods in Canada.

When the Canadian dollar becomes stronger compared to the Mexican peso, it means that one Canadian dollar can buy more pesos. This makes Canadian products cheaper for people in Mexico, so they might start buying more Canadian goods. At the same time, the prices for Mexican goods sold in Canada don’t change, which means Canadians will still pay the same amount for those products. As a result, Mexico may end up importing more from Canada while exporting less to Canada, leading to a trade deficit. For example, if a Canadian shirt costs 100 pesos when the dollar is strong, many Mexicans might choose to buy that shirt instead of a more expensive Mexican shirt, hurting local businesses.