Trump’s Trade Talk Exit Shakes Canadian Dollar

The Canadian Dollar (CAD) plunged as U.S. President Donald Trump abruptly ended trade negotiations with Canada. Announced via social media, Trump’s decision to “take his ball and go home” rattled markets, pushing USD/CAD to 1.3750. Compounding the Loonie’s woes, Canada’s GDP contracted by 0.1% in April, signaling economic slowdown. With inflation easing, markets are betting on Bank of Canada Governor Tiff Macklem to resume rate cuts, further pressuring the CAD. Can Canada weather this storm, or is the Loonie headed for deeper losses?

Tariff Threats Escalate

Trump’s frustration stems from Canada’s move to close a tax loophole on U.S. tech firms’ cross-border sales, a policy years in the making. Misattributing dairy tariffs already set in the USMCA, Trump vowed new tariffs within seven days. This sudden escalation echoes 2018’s trade spats, when U.S. tariffs on Canadian steel sparked retaliatory measures, unsettling both economies.

Market Ripples

The CAD’s slide reflects a broader trend. Despite a long-term bullish tilt, USD/CAD’s recent pivot challenges the 200-day EMA near 1.3950. A Vancouver exporter, for instance, might face higher costs if new tariffs hit, squeezing profits. Canada’s economy faces a dual threat: slowing growth and trade uncertainty. If Macklem cuts rates and Trump imposes tariffs, USD/CAD could surge. Yet, diplomatic restarts could stabilize the Loonie. The next week will be pivotal.