Summary:
The Canadian dollar steadied after rebounding from multi-year lows, while the US dollar dropped as Trump paused new tariffs on Mexico for one month.
The Canadian dollar was steady on Tuesday following a sharp rebound from multi-year lows. The US dollar dropped as Trump paused new tariffs on Mexico which has tightened border control for one month.
The Canadian economy is set to face a severe shock and will probably sink into the first recession in 16 years outside of the pandemic if a tariff war persists, say top economists.
They predict PM Justin Trudeau's plan to retaliate on C$155 billion worth of American-made products will trim real GDP growth by 2-4% and inflation growth will overshoot the 2% target.
Energy patch may have temporarily dodged disaster in the trade war with the US, with crude taxed at a lower rate and possibly letting producers avoid levies altogether on some shipments.
Still it is a blow to a North American energy market that has been highly integrated for decades. Canada is the US's largest foreign source of crude with 84% of its output from Alberta.
According to a new KPMG survey on trade tension, a majority of Alberta business leaders say Canada should retaliate against US tariffs to protect sovereignty and values, even if it causes economic pain.
Loonie has been on a rollercoaster and returned to its recent trading range this week. However, the risk remains skewed towards the downside as Trump will likely impose new tariffs on Europe soon.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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