The Canadian dollar declined 0.2% to C$1.3798 per U.S. dollar on Friday after trade negotiations between Canada and the U.S. collapsed, with Washington imposing 50% tariffs on $20 billion of Canadian goods. The Canadian currency had previously strengthened on expectations of a deal, but the breakdown of talks triggered a broad retreat against all Group of 10 currencies.
Canada’s Prime Minister Mark Carney said the country was rejecting what he described as a ‘bad deal’ and would respond with matching tariffs on U.S. goods including steel, electronics, dairy, appliances and agricultural equipment. These retaliatory measures are scheduled to take effect on September 8. The new U.S. tariffs cover approximately 5% of Canada’s exports to the U.S. and come on top of existing levies on automobiles, aluminum, steel and lumber.
U.S. President Donald Trump posted on social media that Canada sought the benefits of U.S. statehood without accepting its obligations, adding that Canada had imposed ‘massive’ tariffs on American farmers for years. Analysts at Deutsche Bank noted that the Canadian dollar had already weakened by 0.26% against the U.S. dollar in early trading.
Global equity markets declined as investors assessed the fallout from the trade dispute. Japan’s Nikkei fell 0.7%, Hong Kong’s Hang Seng dropped 1.9% and South Korea’s Kospi slumped 3.2%. In commodities, Brent crude, the global oil benchmark, declined 1.6% to $92.81 per barrel amid uncertainty ahead of expected U.S. sanctions on Iran.
Later this week, the Federal Reserve’s annual Jackson Hole symposium will begin in Wyoming, with newly appointed Chair Kevin Warsh scheduled to deliver remarks on Friday. Bond markets remain on edge over inflation concerns and the implications of President Trump’s tax and spending policies, which have contributed to a national debt exceeding $40 trillion. Traders will scrutinize Warsh’s comments for signals on the central bank’s commitment to inflation control, following his previous indications that the Fed would not ‘spoon-feed’ markets on interest rate guidance.
