Trade War Weighs on Canadian Dollar as US Imposes Tariffs

The Canadian Dollar (CAD) traded lower against the US Dollar (USD) on Thursday, as the ongoing trade war between the United States and Canada put pressure on Ottawa's economy. The Loonie was trading near 1.3886 after Washington imposed 50% tariffs on a range of Canadian goods that took effect on Saturday.

Last week, both nations failed to reach a trade deal, leading to retaliatory measures from Prime Minister Mark Carney, who announced tariffs of up to 50% on USD 20 billion of imports. According to TD Securities, the US Section 338 measures and Canada's response will deliver a measurable drag on activity, with analysts expecting a 0.3 percentage point reduction in GDP by 2027.

The US Dollar trades marginally higher, as investors await comments from Federal Reserve Chairman Kevin Warsh at the Jackson Hole Symposium on Friday. The USD/CAD technical analysis suggests a bearish tone, with spot capped beneath the 20-day exponential moving average and the 50.0% Fibonacci retracement.