The Canadian dollar used to be called the “petro-dollar” for a reason—when oil prices moved, so did the loonie. Well, those were the good old days. Lately, the Canadian dollar has been pulled in different directions by everything from V-shaped recoveries to interest rate announcements and, more recently, broader economic uncertainty. The reality is, the ground under investors’ feet keeps shifting, making the future of the Canadian dollar uncertain and much less predictable.
We might call it whiplash, but is it really whiplash if you’re expecting it?
In the last 24 hours, President Trump has floated the idea of delaying broad-based tariffs on Canada and Mexico until April 4th while also confirming that tariffs on Canada, Mexico, the European Union, and China are set to take effect next Tuesday as planned.
If you’ve been living under a rock, here’s a quick update: U.S. President Donald Trump has signed executive orders imposing tariffs on imports from Canada, Mexico, and China. These tariffs were initially set to take effect on February 4, 2025. However, after negotiations, tariffs on Canadian and Mexican imports were paused for 30 days, delaying their implementation until March 4, 2025.
Since President Trump’s inauguration, tariffs have been the dominant force shaping the USD/CAD exchange rate. Yet, it wasn’t long ago that interest rates and inflation were the primary market movers. Now, much like a parent torn between two wailing children, the USD/CAD currency pair is being pulled back and forth between the demands of inflation and trade tensions, with no easy resolution in sight.
Don’t look now, but after a rough start to the year and hitting a multi-decade low, the Canadian dollar seems to be on an upswing. If things stay on track (and there are no surprises from President Trump), the loonie is set to end the week up by more than 1.5%.
Well, there you have it—Canada is back on Trump’s nice list. And as a reward? We get a 30-day break from tariffs and any talk of annexation (phew). No one is celebrating more than the Canadian dollar.
Last Sunday, just before the tariffs were supposed to kick in, the loonie was in rough shape, sinking to a 20-year low. But then, after a couple of phone calls between our Prime Minister and the U.S. President on Monday—and the announcement that tariffs would be delayed—the Canadian dollar quickly bounced back. By Tuesday, it hit 1.4306, its strongest level since January 22.
Over the weekend, President Trump followed through on his tariff threats, imposing new trade restrictions on the U.S.’s two largest trading partners—Canada and Mexico.
The reaction was immediate. The Canadian dollar (CAD) plunged to 1.4792 per U.S. dollar, its lowest level since 2003. However, the Loonie managed to claw back some of those losses, rebounding to the 1.4650 range by Monday morning.
The Canadian Dollar (CAD) has been losing ground against the US Dollar (USD) for three days straight, pushing USD/CAD back above 1.4400. This follows weeks of sideways movement, where the pair has been bouncing between 1.4300 and 1.4500 without a clear direction.
The Canadian dollar seems to be holding steady despite Monday morning’s AI stock crash. The selloff hit AI heavyweights like NVIDIA, which plunged over 10%, along with other tech stocks tanking across the board. This all started after news broke that a Chinese artificial intelligence startup, DeepSeek, developed AI systems comparable to top players like ChatGPT—but at a fraction of the cost.
When it comes to international trade, tariffs can have a massive influence on a country’s economy—and the currency that represents it. For Canada, a nation deeply integrated with the global economy and heavily reliant on exports, the presence or absence of tariffs has a direct impact on the Canadian dollar (CAD), the USD dollar (USD), and the overall Canadian dollar exchange rate. Let’s explore how tariffs—or the lack thereof—could shape the future of the Canadian economy and its currency.
