Canadian Dollar Falls Amid Escalating US-Canada Trade Dispute
The Canadian dollar fell sharply against the U.S. dollar following the collapse of trade talks between Canada and the United States, marking its worst day in over two months. The loonie dropped as much as 0.6% to C$1.3844 per USD amid concerns that new tariffs—particularly a proposed 50% levy on Canadian goods by Washington—could undermine economic growth expectations for Canada. Prime Minister Mark Carney’s pledge to reciprocate U.S. duties has raised investor fears, with analysts warning of prolonged downside risks if the trade dispute escalates further. Market strategists at MUFG and Brown Brothers Harriman anticipate continued pressure on the Canadian dollar in Q3 2026 unless a resolution is reached. The currency had previously rallied since late June but now faces renewed bearish positioning, with hedge funds reducing short bets after hitting two-year highs earlier this month. Analysts also noted that expectations for rate hikes by Canada’s central bank may ease due to the trade uncertainty.
Topics: Canadian dollar foreign exchange trade war US-Canada relations