The Canadian dollar tumbled to its weakest level in nearly five years after US President Donald Trump hinted at imposing 25% tariffs on Canadian and Mexican goods. The so-called loonie plummeted as much as 1.4% to C$1.4516, driven by concerns over escalating trade tensions. However, analysts remain divided on the severity and longevity of the impact, with some predicting further decline while others anticipate a recovery in 2025.
Carter Johnson, Melissa Shin, and Anya AndrianovaAdam Button, chief currency analyst at Forex Live, talks to us about the loonie strengthens to $0.70 U.S. as optimism surrounding tariffs increases.
Implementing the 25% tariff could push the loonie below C$1.50 against the US dollar, according to an analysis from the FX team at the Canadian Imperial Bank of Commerce published Tuesday. If a 10% tariff is applied to Canadian goods, excluding commodities and automobiles — the mildest scenario CIBC modeled — the USD/CAD pair would peak at C$1.4610.
Investors had been dumping the Canadian dollar after the surprise resignation of Prime Minister Justin Trudeau’s finance minister, Chrystia Freeland. It fell 6% in the fourth quarter of 2024, also dragged lower by Trump’s tariff threats. Toronto-based Picton Mahoney Asset Management last week said the loonie’s weakness “highlights investors’ negative sentiment towards Canadian markets, which face increasing economic uncertainty” after Trudeau resigned on Jan. 6 and put parliamentary business on hold until March.
CANADIAN DOLLAR TARIFFS TRADE WAR US ECONOMY LOONIE
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