Tariff Risks Cloud Outlook for Canadian Dollar

Commerzbank analysts have flagged ongoing tariff risks as a major concern for the Canadian dollar's outlook, citing persistent uncertainty around trade policy. This uncertainty can pressure the currency, even as other fundamental drivers evolve.

The bank's assessment points to tariffs' direct impact on Canada's export-driven economy, particularly in energy and manufacturing sectors. Escalating trade barriers with its largest trading partner, the United States, can reduce demand for Canadian goods, weaken economic growth, and weigh on the loonie.

Commerzbank's warning comes amid mixed economic data and shifting expectations for central bank policy. While the Bank of Canada has signaled a data-dependent approach, external shocks from trade policy can force a reassessment of the rate path, adding complexity to currency forecasters.