Canada's Loonie Tumbles Amid Escalating Trade War

Canada's dollar took a hit this week as tensions between the country and the US escalated over tariffs. The Canadian dollar slid to a one-week low, weakening by about 0.4% to roughly $1.3885 per US dollar.

The move was sparked by the US imposing new 50% tariffs on around $20 billion of Canadian imports. In response, Canada imposed retaliatory duties, putting trade risk back at the center of the loonie's story.

The impact of the tariffs is significant because exports and cross-border investment are major drivers of demand for Canadian dollars. When trade rules look shakier, investors tend to assume slower future cash flows and ask for a higher 'risk premium' to hold Canada-linked assets.