Canada-US Trade Tensions Threaten Loonie's Recent Recovery
The Canadian Dollar's recent recovery against the US Dollar is under threat due to renewed trade tensions between Canada and the United States. According to OCBC, the collapse of trade talks has led to a 50% tariff on about USD20bn of Canadian imports from the US. In response, Canada plans to impose dollar-for-dollar retaliation from 8 September, targeting sectors such as steel, dairy, and electronics.
The breakdown in trade negotiations adds fresh uncertainty to the future of the USMCA and could weigh on Canada's improving economic outlook. Domestic conditions had been showing signs of rebound, with unemployment falling for a third consecutive month in July to a two-year low of 6.4%. However, renewed trade tensions threaten to derail that momentum and may leave the loonie vulnerable after its recent rebound.