Archive · 25 Aug 2026
Canadian Dollar Tumbles as Trade Rift Threatens Growth Outlook
Canada and the United States were trying to negotiate trade rules, but the talks broke down.
After that, Canada’s dollar became less valuable compared with the US dollar.
The drop happened because new US tariffs could make it harder for Canada’s economy to grow.
Tariffs are extra taxes placed on goods coming from another country.
Prime Minister Mark Carney said Canada would respond to US tariffs with matching duties.
Some analysts think this disagreement could push the Canadian dollar down further.
Investors may also change their expectations about Canadian interest rates.
However, changes in US interest-rate expectations could stop the Canadian dollar from falling too far.
The Canadian dollar fell as much as 0.6% to C$1.3844 per US dollar after Canada-US trade talks collapsed.
The loonie was leading losses among Group-of-10 currencies and was headed for its worst day since June 17.
Washington’s latest 50% tariffs on billions of dollars of Canadian goods threaten Canada’s expected economic pickup.
Prime Minister Mark Carney pledged to match US duties “dollar for dollar,” raising concerns about investor confidence.
Analysts said the loonie could weaken further, though reduced expectations for US rate cuts could limit moves beyond C$1.4000 per US dollar.
- Who
- Canada, the United States, Prime Minister Mark Carney, and currency-market analysts.
- What
- The Canadian dollar fell after Canada-US trade talks collapsed amid escalating tariffs.
- When
- The decline occurred after the trade talks collapsed; the currency was on course for its worst performance since June 17.
- Where
- In trading against the US dollar, amid a Canada-US trade dispute.
- Why
- New US tariffs threaten Canada’s economic growth, while Canada’s planned retaliation could further weaken investor confidence.
Further Canadian-Dollar Weakness
Limits on the Dollar’s Decline
Near-term currency outlook
Further Canadian-Dollar Weakness
Derek Halpenny of MUFG said risks would intensify if the trade war continues and forecast the loonie at C$1.41 per US dollar in the third quarter.
Limits on the Dollar’s Decline
Elias Haddad of Brown Brothers Harriman said reduced expectations for US interest-rate cuts could limit moves in USD/CAD beyond 1.4000.
Interest-rate expectations
Further Canadian-Dollar Weakness
An escalating trade war could reduce expectations for Canadian rate hikes, putting additional pressure on the Canadian dollar.
Limits on the Dollar’s Decline
The possibility that expectations for US rate cuts also ease could support the US dollar and limit excessive USD/CAD gains.
- Currency move
- The Canadian dollar fell as much as 0.6% to C$1.3844 per US dollar.
- Trade talks
- Trade talks between Canada and the United States collapsed.
- US tariffs
- Washington imposed or announced latest 50% tariffs on billions of dollars of Canadian goods.
- Canadian response
- Prime Minister Mark Carney pledged to match US duties “dollar for dollar.”
- Market forecast
- MUFG forecasts the loonie could fall to C$1.41 per US dollar in the third quarter.
- Canadian rate expectations
- Swaps markets were pricing about 70 basis points of Canadian interest-rate hikes through June.
- Potential resistance
- Brown Brothers Harriman said weaker expectations for US rate cuts could limit USD/CAD moves beyond 1.4000.