Loonie Plunges Amid Escalating US-Canada Trade Tensions
Canada's dollar weakened to C$1.384 per US dollar on Saturday after US-Canada trade talks broke down and new Section 338 duties took effect, with Canada vowing to retaliate dollar-for-dollar.
The collapse of the negotiations occurred just ahead of President Donald Trump's planned 50% tariffs on roughly C$28 billion of Canadian goods. Prime Minister Mark Carney attributed the breakdown to 'last-minute changes,' while the US blamed Canada for the failure.
MUFG strategist Derek Halpenny described the loonie as 'the clear underperformer in G10' due to its decline, and RBC Economics argued that the direct growth impact appears manageable at 0.4% of Canada's economy. However, market participants are more concerned about the escalation risk rather than the immediate tariff list.
The real worry is a tit-for-tat cycle, which can freeze business plans as companies delay hiring and investment until they know what rules will stick, potentially weighing on growth and keeping currency traders cautious.