- The Canadian dollar marginally rebounded from a 22-year fall against United States dollar
- The rebound follows hopes that Donald Trump will pause the 25 per cent tariff imposed on the country
- The tariff imposition will make US consumers pay more for goods imported from Canada, Mexico, and China
The Canadian dollar saw a marginal rebound on Monday, February 3, from a 22-year fall against the United States (US) dollar at the weekend.
The loonie was trading 0.5 per cent lower at 1.4590 to the USD, or 68.54 US cents, after it earlier fell to its weakest level since April 2003 at 1.4793.
This rebound comes on the heels of hopes from investors due to a pause on US President Donald Trump’s 25 per cent tariff against Mexico.
Trump said he paused new tariffs on Mexico for one month after it agreed to reinforce its northern border with 10,000 National Guard members to stem the flow of illegal drugs.
The US President said he had spoken with Canadian Prime Minister, Justin Trudeau, and would do so again at 3 p.m. ET (2000 GMT).
Per The New York Times, Canada does not share the optimism that it can get the same kind of one-month reprieve from US tariffs granted to Mexico, said a senior Canadian government official on Monday, February 3.
Trump imposed 25 per cent on goods from Canada
It would be recalled that Trump ordered sweeping 25 per cent tariffs on goods from Mexico and Canada, and a 10 per cent tariff on Chinese goods on Saturday, February 1. He also imposed a 10 per cent tariff on Canada’s oil and natural gas imports.
Barring any changes, the tariffs on Canada remain poised to take effect on Tuesday, February 4.
However, the Canadian Prime Minister said Canada would respond with 25 per cent retaliatory tariffs against $155 billion of US goods.
The Bank of Canada last week warned that a tariff war could cause major economic damage as it cut its benchmark interest rate by 25 basis points to three per cent.
US consumers to pay more following tariffs
Trump’s imposition of more tariffs on goods from Mexico, Canada, and China could have a follow-through impact on the costs of goods and services for US consumers, similar to the situation when Trump imposed tariffs on China during his first term.
There are expectations that some companies may try to pass the cost on to their customers by raising prices. Others may opt to eat the cost of the tariff, while some companies may also try to force foreign suppliers to bear the burden by negotiating lower prices for their products.
Canada supplies approximately 60 per cent of the oil imported into the US and a 10 per cent tariff increase on Canadian energy could signal an uptick in prices at the pump, especially in the Midwest, where refineries turn Canadian oil into gasoline and diesel.
There’s also concern about inflationary pressures across the board. Per The New York Times, analysts at Goldman Sachs have said that if Trump proceeds with across-the-board tariffs, it would both raise prices in the United States and slow economic growth.
Also, most economists expect that fresh trade barriers could lead to a temporary surge of higher inflation.
Again, Trump threatens BRICS countries with 100% tariffs if they reject dollar payments
Meanwhile, TheRadar earlier reported that President of the United States, Donald Trump, threatened the BRICS group of emerging economies with 100 per cent tariffs if they move away from the US dollar as an international means of payment.
Trump wrote this on his social media platform, Truth Social, on Thursday, January 30, noting that the BRICS countries should expect to face other economic sanctions, including being restricted from selling into the US economy.