The Canadian dollar declined on Monday, with the loonie losing about 0.6% against the U.S. dollar, trading at roughly 72.24 U.S. cents. The currency pair USD/CAD reached approximately C$1.385, while the broader U.S. Dollar Index rose 0.2% to 98.981.
The retreat in the loonie followed the collapse of bilateral trade negotiations between the U.S. and Canada late last week. U.S. President Donald Trump escalated tensions by threatening to impose a 50% tariff on Canadian automobiles, auto parts, and steel, effective January 1, 2027. Trump’s remarks on Truth Social reiterated his stance, stating, 'Canada will no longer be treated like a state.' Canadian Prime Minister Mark Carney characterized the breakdown as an attack, telling journalists, 'you are at war when you are attacked. We have been attacked.'
Economic data released prior to the tariff threats showed Canada’s annualized GDP expanded by 3.4% in the second quarter, while employment grew by 75,000 jobs in July. Despite these figures, the loonie’s recent gains—driven in part by a U.S. Treasury bond buyback announcement in mid-August—have been eroded by the renewed trade dispute. Karl Schamotta, chief market strategist at Corpay Cross-Border Solutions, described the bond buyback as the 'predominant driving force' behind the loonie’s mid-August appreciation.
The Canadian dollar’s technical indicators also reflected the pressure, with the USD/CAD daily Relative Strength Index entering oversold territory for the first time since January. Meanwhile, gold prices rose 0.9% to $4,643 per ounce, while the EUR/USD pair dipped 0.1% to $1.1665 and USD/JPY edged up 0.1% to 159.13.
Canada has scheduled retaliatory tariffs targeting U.S. steel, dairy, home appliances, agricultural equipment, pulp and paper, and electronics, set to take effect on September 8. The loonie’s decline underscores the growing uncertainty in cross-border trade relations and its immediate impact on currency markets.
