The Canadian dollar (CAD) tumbled to a three-week low against the U.S. dollar (USD) on Thursday, as fresh comments from U.S. President Donald Trump dashed any hopes of a delay in the imposition of tariffs on Canadian goods. In a statement that cleared up previous confusion regarding the timing of the tariffs, Trump confirmed that his controversial 25% tariffs on Mexican and Canadian imports would go into effect on March 4, bringing an end to speculation about a possible postponement.
As a result, the loonie depreciated by 0.8%, trading at 1.4425 per U.S. dollar, which equates to 69.32 U.S. cents. This marked its weakest intraday level since February 4, when it touched 1.4442. Thursday’s decline marked the fifth consecutive day of losses for the Canadian currency, underscoring the growing concerns over the economic impact of the tariffs.
Trump’s announcement, made earlier in the day, made it clear that he would follow through with the tariffs, citing the ongoing flow of drugs from Canada and Mexico into the United States as justification for the measures. This comes after comments from the U.S. president the previous day seemed to suggest he might delay the implementation of the tariffs until April 4. For market participants who had been hoping for a reprieve, the confirmation of the tariffs’ start date was a bitter blow.
Erik Bregar, Director of FX & Precious Metals Risk Management at Silver Gold Bull, characterized the move as a “slap in the face” for traders who had positioned themselves in anticipation of a tariff delay. “It’s an angry, get me out of the market, kind of move,” Bregar noted, as the Canadian dollar faced increasing pressure.
In early February, the loonie had already fallen to a 22-year low of 1.4793, driven by fears over the impending tariffs. However, that decline was mitigated when Trump postponed the tariff implementation, giving the Canadian dollar some breathing room. The currency’s recent fall, however, shows how quickly sentiment can shift as political developments unfold.
Despite the loonie’s struggles, oil prices, one of Canada’s major exports, provided some support to the Canadian economy. Crude oil prices rose by 2.2% to $70.11 per barrel, as supply concerns resurfaced following Trump’s decision to revoke a license granted to U.S. oil giant Chevron, allowing the company to operate in Venezuela. This development sparked fresh worries over oil supply disruptions, which could benefit oil-exporting nations like Canada.
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Looking ahead, Canadian economic data could also provide some insight into the currency’s potential trajectory. On Friday, Statistics Canada is set to release its fourth-quarter gross domestic product (GDP) data. Economists are expecting an annualized growth rate of 1.8%, which could influence market expectations for further interest rate cuts by the Bank of Canada.
Additionally, Canadian bond yields were mixed across a steeper curve. The 2-year bond yield fell by 1.4 basis points to 2.636%, reflecting some of the broader uncertainty in the Canadian financial markets.
Overall, the Canadian dollar’s recent performance highlights the significant impact of global political and economic developments on currency markets. With U.S. tariffs on Canadian goods now officially set to take effect next week, the loonie’s outlook remains uncertain as traders brace for the potential fallout. Meanwhile, Canada’s economic data, particularly its GDP and oil prices, will likely continue to play a pivotal role in shaping the currency’s movement in the days to come.
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