The Canadian dollar experienced a notable decline on Thursday, hitting a three-week low against its U.S. counterpart, following U.S. President Donald Trump’s confirmation that tariffs on Canadian goods would take effect on March 4. This statement clarified earlier uncertainties regarding the timing of the tariffs, effectively extinguishing any hopes that the imposition might be postponed.
At the close of trading, the loonie stood at 1.4425 per U.S. dollar, marking a 0.8% drop, or 69.32 U.S. cents. The currency briefly touched its weakest point since February 4, at 1.4442, continuing its downward trajectory for the fifth consecutive day.
Trump’s announcement came in the context of his ongoing trade war strategy, with the President reiterating that a 25% tariff on both Mexican and Canadian imports would proceed as originally scheduled. Trump cited the continued influx of illegal drugs into the U.S. from these neighboring countries as the rationale behind the decision. This echoed his earlier remarks from Wednesday, where he had hinted at a potential delay in tariff enforcement by about a month, pushing the deadline to April 4. The reversal of expectations led to a wave of negative sentiment among traders.
“This move comes as a shock to those who had positioned themselves in anticipation of relief. It feels like a slap in the face for the markets,” said Erik Bregar, director of FX & precious metals risk management at Silver Gold Bull. “Traders are reacting with frustration, eager to exit their positions.”
The Canadian dollar had already weakened earlier this month, reaching a 22-year low of 1.4793 on February 3, amid concerns over the impending tariffs. However, those fears had been temporarily alleviated when the tariffs were delayed.
Adding to the market volatility, the price of oil — a key Canadian export — surged 2.2%, reaching $70.11 per barrel, as supply concerns were reignited following President Trump’s decision to revoke a license granted to U.S. oil giant Chevron to operate in Venezuela.
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In the coming days, Canadian economic data could provide some guidance on the country’s financial outlook. Specifically, fourth-quarter GDP figures, set for release on Friday, are expected to reveal annualized growth of 1.8%. The results could influence expectations regarding the Bank of Canada’s potential future interest rate cuts.
Meanwhile, Canadian bond yields displayed mixed movement across the curve. The 2-year yield dropped 1.4 basis points, settling at 2.636%, reflecting the overall uncertainty in the financial markets as the economic landscape continues to evolve.
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