Canadian Dollar Weakens Despite August Trade Surplus Surge

The Canadian dollar faced continued pressure on Tuesday, lingering near an 18-month low despite a surprising expansion in Canada's trade surplus. The loonie was trading around C$1.4274 per U.S. dollar, with USD/CAD up about 0.09%. The currency's weakness persisted even though Canada's merchandise trade surplus widened to C$4.2 billion in August, marking its largest surplus in over four years. Economists had expected a much smaller surplus of C$1.55 billion.

The trade data offered a brief positive outlook for the Canadian economy, but questions linger about its sustainability. Exports to the United States surged 8.1% in August, while imports from the U.S. dropped 2.5%, boosting Canada's trade surplus with its largest trading partner to C$11.2 billion. The U.S. accounted for nearly 70% of Canada's exports, the highest share since September 2025. Overall exports climbed 2.5% to C$77.91 billion, driven by a 4.7% increase in energy exports, while imports fell 2% to C$73.71 billion.

The Canadian dollar had already weakened to an 18-month low on Monday, reaching as low as C$1.4293 per U.S. dollar. This decline was attributed to broad gains in the U.S. dollar and another contraction in Canada's services sector. The trade figures for September are expected to provide a clearer picture of the impact of President Donald Trump's new 50% tariffs, which took effect on Aug. 22.