Canadian dollar slides as US-Canada trade war heats up
The Canadian dollar slides Monday after U.S.-Canada trade talks collapsed and Washington imposed 50% tariffs on about $20 billion of Canadian imports. Ottawa pledged dollar-for-dollar retaliation from Sept. 8, raising risks to Canada's growth outlook as markets price a weaker loonie amid an all-out trade rift.
Key Takeaways
- The loonie fell as much as 0.6% to C$1.3844 versus the U.S. dollar, leading losses across G-10 currencies.
- The U.S. imposed 50% tariffs on roughly $20 billion of Canadian goods spanning dairy, wine, wood, furniture and more.
- Prime Minister Mark Carney said Washington "asked too much" and vowed retaliatory tariffs from Sept. 8.
- Economists warn Canada's open economy is more exposed; further escalation could push growth toward zero or worse.
What triggered Monday's Canadian dollar slides?
Trade talks between Ottawa and Washington broke down over the weekend. The U.S. on Saturday slapped 50% tariffs on about $20 billion of Canadian imports, covering dairy, wine, wood products, furniture, cement, ceramics and other goods.
U.S. Trade Representative Jamieson Greer told CNBC a deal was close until Canada "wanted more" than Washington would offer. Canadian Prime Minister Mark Carney countered that the U.S. had "asked too much and offered too little," refusing to compromise sovereignty or key industries.
Carney said Canada would retaliate "dollar for dollar" with tariffs from Sept. 8 on sectors including steel, dairy, agricultural equipment, paper and electronics. "We got attacked," he told reporters when asked about entering a trade war.
How much economic damage could follow?
ING strategists noted Canada, as a smaller open economy, "has more to lose." The new U.S. duties cover about 5% of Canada's goods exports to the U.S., or roughly 0.6% of Canadian GDP.
Capital Economics' Bradley Saunders said exposed industries "could be crippled," and a collapse in those exports could push already-weak GDP growth back toward zero. Extending 50% tariffs to a fifth of Canada's U.S. goods exports could knock around 2% from GDP and risk recession, he estimated.
Economist Trevor Tombe has estimated ongoing 50% U.S. tariffs could cost around 90,000 Canadian jobs. Carney acknowledged duties would "raise costs and reduce choice for Canadians," while signaling possible fiscal support for businesses.
Where could the loonie go next?
Bloomberg reported the currency was heading for its worst day against the dollar in more than two months, falling as much as 0.6% to C$1.3844. MUFG's Derek Halpenny said Carney's matching-tariff pledge adds risk and forecasts the loonie sliding to C$1.41 per U.S. dollar in the third quarter.
Brown Brothers Harriman's Elias Haddad said an escalating trade war would likely ease expectations for Canadian rate hikes, keeping the currency under pressure near term, though softer U.S. hike bets may limit USD/CAD overshoots beyond 1.4000.
For broader BlasterPost coverage beyond markets, see our Longevity & Biohacking hub. Markets will watch whether Washington retaliates further if Ottawa's Sept. 8 countermeasures land as planned.