The Canadian dollar fell to its lowest level since May 2020 after President Donald Trump threatened to impose tariffs on Canadian goods shipped to the United States once he takes office in January.
The threat of tariffs was another drag on a frantic market that has been falling against the US dollar since September.
It stood at 71.01 cents in the U.S. in afternoon trading, after falling below 71 cents in the U.S. earlier in the day.
Robert Kavcic, senior economist at BMO Capital Markets, said financial markets were responding to increased trade risks.
“That’s a pretty strong headwind for a currency that’s already under pressure from domestic economic factors alone,” he said.
Kavucic noted that the lunatic is already under pressure from a weak Canadian economy and interest rate cuts by the Bank of Canada.
The central bank has lowered the benchmark interest rate four times this year. The country cut interest rates by 0.5 percentage point in October to 3.75% as its concerns shifted from the need to contain inflation to the need for stronger economic growth.
President Trump posted on Truth Social on Monday that he would impose a 25% tariff on all products from Canada and Mexico. He said the tariffs will continue until both countries stop drugs, especially fentanyl, and stop people from crossing the border illegally.
But President Trump’s social media edict is not yet U.S. government policy, and even if it happens, it could only be temporary as the president-elect ties it to border conditions. .
Karl Sciamotta, chief market strategist at Kopay, said investors don’t expect Trump to follow through.
“Canadian Prime Minister Justin Trudeau has already shown signs of capitulating to President Trump’s demands, and the president-elect’s history suggests that last night’s post merely represents an early step in the negotiation process. may be indicated,” he wrote in a note to clients.
The Canadian dollar was trading at 70.87 cents in the United States early Tuesday, down from 71.53 cents on Monday, following US President-elect Donald Trump’s pledge to impose a 25% tariff on all Canadian imports. did. CBC News senior business correspondent Peter Armstrong takes a closer look at the potential impact of President Trump’s proposals on Canada’s economy.
“The Canadian dollar appears poised for a modest reversal on the upside once traders assess the situation from a more nuanced perspective.”
For Canadians looking to shop across the border this week on Black Friday, the cost of bearish lunatics will go up, while Canadian goods will become cheaper for buyers with US dollars, and for Americans there will be potential This would offset some of the cost of customs duties.
Any tariffs could also include carve-outs for specific industries, such as oil and gas, and the auto sector, where parts move across borders before being finally assembled into cars and trucks.
“The energy sector does not have the capacity to quickly replace the production of 3 million barrels per day, so it makes no sense,” Kavcic said.
“And there are other areas like automotive where the industry is very consolidated.”
