Currency rates in exchanges

The imposition of 25% tariffs on goods imported from Canada by the United States has triggered a strong reaction from the Canadian government. Prime Minister Justin Trudeau announced that Canada would retaliate by implementing similar 25% tariffs on $155 billion worth of U.S. goods. This trade war has had a direct impact on the Canadian dollar (CAD), causing it to weaken against the U.S. dollar (USD).

Decline in the Canadian Dollar Following the Tariff Announcement: Following the announcement of the new tariffs by the U.S. and Canada's reciprocal response, the Canadian dollar dropped to its lowest level in five years. The USD/CAD exchange rate surged by 50 pips, reaching 1.4370. Analysts have warned that if the tensions persist, the exchange rate could rise to the range of 1.50 to 1.60.

Factors Contributing to the Decline of the Canadian Dollar:

• High Trade Dependence: Since 75% of Canada's exports go to the U.S., these tariffs could significantly impact Canada's economy.
• Increased Economic Uncertainty: The tariffs not only raise import costs and hinder economic growth but have also made investors wary about the future of Canada's economy.
• Monetary Policy of the Bank of Canada: In response to the new economic challenges, the Bank of Canada has reduced interest rates, which has further weakened the Canadian dollar.
• Canada's Retaliation Measures: The Canadian government has imposed tariffs on U.S. products such as beer, wine, perfumes, shoes, and agricultural products, attempting to mitigate the impact on its own economy.
  
  Forecast for the Canadian Dollar:
• If trade tensions persist, the Canadian dollar could weaken even further, pushing the USD/CAD exchange rate to 1.5000.
• The Bank of Canada may cut interest rates further to support the economy.
• The increase in tariffs could negatively affect business investments in Canada and slow down the country’s economic growth.

Conclusion: The new trade tariffs between the United States and Canada have placed significant pressure on the Canadian dollar. Canada's retaliatory move to impose tariffs on U.S. goods signifies the intensification of the trade war between the two nations. The decline in the Canadian dollar against the U.S. dollar has raised concerns among economic actors, prompting Canadian policymakers to make crucial decisions to manage the crisis. It remains to be seen whether trade negotiations can de-escalate these tensions or if Canada will face deeper economic challenges.