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.
