But the currency had rallied back as Mexican and US officials took a more constructive tone on trade since then.
Even threatening to withdraw from Nafta could heighten tensions with Mexico and Canada, close allies and trading partners.
One senior administration official stressed that this is something Trump has "always been considering" and while the White House is now considering an executive order, the official stressed a lot could change in the coming days.
Drafted by Peter Navarro, director of the National Trade Council, with help from chief strategist Steve Bannon, the order would be a win for advocates of economic nationalism in Mr. Trump's White House. It could be signed later this week or early next.
The White House is yet to respond to requests for comment on the situation.
The move comes after a week of salvoes from the Trump administration against Canada.
Last week, Trump upped his rhetoric over Canada's trade policies, calling its dairy protections "unfair".
France says analysis shows Syria regime behind sarin attack
North Atlantic Treaty Organisation member Turkey considers the YPG an extension of an insurgency within its own borders. The SDF and the Syrian government have largely avoided confrontations with each other over the course of the civil war.
Earlier this week, the Trump administration levied a tariff on imports of softwood lumber from Canada amid a broader trade dispute.
"People don't realize, Canada's been very rough on the United States".
The possible executive order, first reported by Politico, sent stocks and currencies falling in Mexico and Canada. He argued in favor of ripping up trade deals, said NAFTA was "the worst trade deal in the history of the country", and called the Trans-Pacific Partnership, or TPP, "a rape of our country".
The Trump administration is expected to formally notify Congress of its intent to renegotiate NAFTA within the next two weeks. That notification would trigger a 90-day countdown to the start of formal talks. Under the NAFTA terms, any party may withdraw "six months after it provides written notice of withdrawal to the other Parties".
CBS News' Margaret Brennan reports from the White House on a potential trade war between the United States and Canada.
Such a unilateral withdrawal would be hard for the USA, which depends on numerous integrated supply chains across its borders.
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