Canadian Dollar Weakening Amid US Tariff Policies

On Monday, the Canadian dollar experienced a slight decline relative to the US dollar. Trading at 1.4310 CAD per 1 USD — equivalent to 69.88 US cents — the currency fell by 0.1% amid fluctuations ranging between 1.4289 and 1.4379.

Despite the marginal dip in the Canadian dollar, robust domestic economic indicators have provided some stability. Analysts noted that favorable economic data from within Canada helped counterbalance growing concerns over potential US tariffs on steel and aluminum imports. The anticipation of these trade measures continues to exert a subtle yet persistent pressure on the currency.

Key Factors Driving Currency Movements

1. The moderate depreciation of the Canadian dollar against the US currency.

2. The juxtaposition of promising domestic economic performance with rising concerns over tariff impositions.

3. The expected announcement by then-President Donald Trump of new 25% tariffs on all imported steel and aluminum from the United States, which compounds existing trade tensions.

Influences on the Metals Market

- Strategic Importance of Steel Exports. Canada plays a pivotal role as an exporter of steel to the United States. In fact, Canadian exports significantly contribute to the US market, particularly considering that 79% of the primary aluminum imported during the first 11 months of 2024 came from Canada.

- Anticipated Impact of Trade Policy Adjustments. The prospect of additional tariffs has sparked discussions about the future outlook of the metals industry and may affect companies that are publicly traded. For instance, US-based firms such as U.S. Steel $X and Nucor Corporation $NUE could face market pressure from these policy shifts.

Analysis of Tariff Implications

The potential imposition of new tariffs on steel and aluminum is a critical external factor capable of influencing the Canadian dollar. This scenario emphasizes the importance of monitoring international trade developments, as administrative decisions on tariffs can have cascading effects on currency valuations and overall market sentiment.

Considering both the internal economic strength and the external trade risks, the ongoing adjustment in the trade balance between Canada and the United States may lead to further currency fluctuations. This nuanced analysis is essential for understanding the multifaceted effects of trade policies on financial markets.