Canadian Dollar: Tariff delay offers only muted relief – Commerzbank

Michael Pfister at Commerzbank reports that new 50% US tariffs on selected Canadian goods have been delayed by three days as an agreement is reportedly close, prompting only a modest Canadian Dollar (CAD) rebound amid uncertainty over the deal’s durability. He stresses that for a stronger CAD recovery, the new accord must prove robust and not be quickly questioned, given the slow domestic economic rebound.

Trade deal uncertainty and CAD recovery

"New US tariffs of 50% on certain Canadian goods were due to come into force today. But a few hours ago, the US President postponed them by three days, as an agreement has been reached and more time is needed to finalise it."

"The Canadian dollar reacted with relief to the announcement, although the movement was fairly muted. Market participants are presumably uncertain whether the deal will actually go ahead, and if so, what form it will take."

"Even if an agreement is ultimately reached, the focus in the coming weeks is likely to be on how robust the deal is. After all, although the USMCA was approved by the US President during his first term in office, he has criticised the trade agreement repeatedly in recent months."

"For the Canadian dollar to recover more strongly, the new agreement must not be called into question again after just a few weeks. In such a scenario, the slow recovery of the Canadian real economy is likely to continue"

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)