The Canadian dollar extended its losses on Tuesday after US officials reportedly downplayed hopes for a last-minute trade deal with Canada. Trade officials from both countries kept pushing to strike an agreement before a midnight tariff deadline, with 50% US duties threatening tens of billions of dollars in Canadian goods.
The Canadian dollar weakened on Tuesday as US officials reportedly lowered expectations for a last-minute trade deal with Canada ahead of a midnight tariff deadline. President Donald Trump and Prime Minister Mark Carney are nevertheless expected to speak again before the deadline hits.
Against the greenback, it traded 0.2% lower at 1.39 per US dollar, or 71.94 US cents. That follows Monday's session, when the currency touched its strongest level in more than two months at 1.3842 after Carney and Trump held direct talks.
Tariff deadline puts loonie on edge
The 50% US tariffs are scheduled to hit around $20 billion of Canadian imports at 12:01 a.m. Wednesday. Canadian officials have described the negotiations as intense and delicate, but the White House has reportedly signaled that no breakthrough has yet emerged that would justify delaying the tariffs.
Separately, Canadian and American trade officials were working Tuesday to finalize an agreement that would avert a new wave of 50% tariffs on roughly $30 billion in Canadian goods, according to a CBC News report. Those Section 338 duties would target Canadian liquor, timber, paper, and sporting goods exports, and were framed as retaliation for tariffs Ottawa levied in response to earlier US trade actions.
Ottawa pushes for broader relief
Canadian Trade Minister Dominic LeBlanc is expected to meet US Trade Representative Jamieson Greer as part of the talks, while Carney may hold separate discussions with Trump. As of midday Tuesday, however, no formal schedule had been set. LeBlanc is reportedly seeking not only to eliminate the Section 338 threat but also to secure reductions in existing Section 232 tariffs on steel, aluminum, and automobiles.
What a deal, or its absence, could mean
Strategists at Monex Europe said a lasting agreement could push the USD/CAD exchange rate toward 1.37, while an escalation in tensions could drive the rate back above 1.40 in the coming days. Canadian bond yields, meanwhile, pulled back from multi-year highs as the negotiations continued.
If the talks produce a breakthrough or the tariffs get delayed, the Canadian dollar could rally in the short term; if they fail, the loonie will likely extend its losses against the US dollar in the coming days.
Sources: Investinglive, Investing.com, Investing.com
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