The Canadian Dollar (CAD) fell 0.58% against the US Dollar on Monday following the breakdown of trade talks between Ottawa and Washington. Tensions escalated after the United States announced the implementation of 50% tariffs on about $20 billion worth of Canadian imports, including dairy, lumber, furniture, and cement.
In direct response, Canadian Prime Minister Mark Carney declared that Ottawa would impose “dollar-for-dollar” retaliatory tariffs starting September 8 on U.S. steel, dairy products, agricultural machinery, paper, and electronics. Carney stressed that Canada would not compromise its sovereignty or allow its key industries to be weakened.
U.S. Trade Representative Jamieson Greer blamed Canada for the breakdown of the talks, claiming that Ottawa was demanding excessive concessions beyond Washington’s original offer. The main sticking points in the talks reportedly stem from disagreements over the terms of tariffs on autos, steel, aluminum, as well as the safeguard clauses for the use of French and the autonomy of Canada’s free trade agreement.
Economists have warned that Canada’s export-oriented economy is far more vulnerable to a downturn than the U.S. While the current tariffs target around 5% of Canada’s total merchandise exports, analysts at Capital Economics have warned that the supply chain drag could push Canada’s already fragile GDP growth close to zero.
If the trade conflict drags on and the U.S. extends the 50% tariff to a wider range of goods, Canada’s GDP is projected to contract by up to 2%, triggering a recession and risking the loss of 90,000 jobs. The development has put financial markets and the Bank of Canada on alert for a potential regional economic shock.
