Loonie Takes a Hit as Trade Tensions Between US and Canada Escalate

The Canadian Dollar took a hit on Monday as trade negotiations between Canada and the US broke down. The USD/CAD pair rose by half of one percent, with markets reacting to renewed tariff threats.

The US imposed 50% tariffs on various Canadian goods, prompting Canada to prepare a dollar-for-dollar response. This move raises growth risk and threatens export demand, adding a fresh political premium to Canadian assets.

Crude prices also fell by around 2%, stripping away the usual commodity support that Canada receives when energy markets are strong. For the Bank of Canada (BOC), this is a concerning mix: tariffs threaten growth, oil weakness hurts the terms-of-trade story, and inflation risk remains complicated due to trade policy.

The USD/CAD chart shows that the pair flushed hard from its late-June high above 1.4200, breaking below the moving-average stack and slicing through the prior support zone around 1.3920-1.3970. This zone now serves as key resistance for the pair.