USD/CAD Surges as Trade Tensions Escalate with US-Canada Tariff War

The Canadian Dollar has weakened following the collapse of trade talks between the US and Canada. This collapse led to USD/CAD rising by 0.52% to around 1.3830 on Monday.

The US imposed 50% tariffs on some Canadian products, while Canada vowed to retaliate 'dollar for dollar' from September 8. Additionally, Donald Trump announced that tariffs on Canadian cars, trucks, automotive parts, and steel would rise to 50% from January 1, 2027.

The CAD may find support from the US plan to broaden secondary sanctions on Iran, which could target specific Iranian sectors and pressure trading partners by linking compliance to access to the US Dollar-based financial system. This move follows nearly six months of disruption to the Strait of Hormuz and Gulf energy exports.