OCBC’s Sim Moh Siong and Christopher Wong caution that renewed trade friction between the United States and Canada could erode the Canadian Dollar’s (CAD) modest rebound. The sudden collapse of trade negotiations, coupled with the U.S. imposing 50% tariffs on roughly USD20 billion in Canadian goods and Canada’s retaliatory measures set to begin on September 8th, injects renewed uncertainty into the economic outlook—undermining recent signs of strength tied to declining unemployment rates.
Tariff Disputes Threaten CAD Rebound
“Just as a Canada-U.S. trade agreement seemed imminent, talks fell apart at the final stage.”
“The U.S. has implemented 50% tariffs on approximately USD20 billion worth of Canadian imports, leading Canada to announce reciprocal countermeasures effective September 8th, particularly affecting industries like steel, dairy, and electronics.”
“The impasse introduces fresh uncertainty regarding the future of the USMCA and may dampen Canada’s improving economic trajectory.”
“Domestic indicators had been pointing toward stabilization, with the jobless rate declining for the third straight month in July, reaching a two-year low of 6.4%, which had provided some support to the CAD.”
“Nevertheless, resurgent trade tensions risk stalling this positive trend and could expose the loonie to renewed weakness following its recent uptick.”