Rewritten and Expanded Article Based on Original by Kenny Fisher on Forex Crunch – “USD/CAD Weekly Forecast: Trump Tariffs Rekindle Trade Fears”
The USD/CAD currency pair encountered significant volatility during the week ending July 12, 2025, catalyzed by a sudden resurgence in geopolitical tensions between the United States and key trading partners. This tension was fueled by a surprise announcement by former President Donald Trump, now the leading 2024 Republican presidential candidate, proposing the reintroduction of sweeping tariffs on foreign imports if re-elected. The resulting uncertainty in markets sparked a wave of risk-off sentiment, with investors seeking safe-haven currencies, including the U.S. dollar, while risk-sensitive currencies like the Canadian dollar came under pressure.
This article analyzes recent developments in the USD/CAD pair and provides a comprehensive outlook for traders and investors in the coming week, touching upon global risk sentiment, U.S. and Canadian macroeconomic indicators, and broader commodity trends.
Highlights from the Past Week
Several key developments affected the USD/CAD exchange rate over the week:
– The pair climbed to a high of 1.3432 before retreating to close around 1.3368 by the weekend.
– Renewed fears of global tariff wars triggered demand for the USD as a safe-haven asset.
– Canadian economic data was mixed, adding to the uncertainty facing the loonie.
– Oil prices remained volatile, lacking a clear upward trend to support CAD.
Let’s examine the core contributors to the week’s price action.
1. Trump’s Tariff Comments Roil Markets
On July 8, Donald Trump publicly vowed to reimpose tariffs on Chinese, European, and Mexican goods if he wins the 2024 U.S. Presidential election. Trump suggested tariffs of up to 10% on all imports and higher levies on Chinese goods specifically, signaling a return to protectionist policies. While this announcement is speculative — since he is not yet back in office — it had immediate consequences on market sentiment.
– Investors interpreted the comments as a step toward a possible escalation in trade tensions moving into 2025.
– The remarks prompted a safe-haven flow into the U.S. dollar, as markets anticipated a chilling effect on global trade and growth if implemented.
– This resurgence of trade war rhetoric mirrored similar events from the 2018–2019 period under Trump’s first term when global equities dipped and commodity currencies weakened.
USD/CAD rose in response, with traders preparing for potential disruptions to U.S.–Canada trade relations, given Canada’s heavy reliance on exports to the U.S.
2. Canadian Economic Data – A Mixed Bag
Canada released several important pieces of data over the past week, which were met with muted enthusiasm from markets.
Employment Numbers (June):
– Net change in employment: -2,900 (vs expected +20,000)
– Unemployment rate: Increased to 6.3% from 6.2%
– Wage inflation: Rose 5.6% YoY (still elevated)
While wage growth remains strong and continues to support consumption, the job losses and rising unemployment dampened confidence in the Canadian labor market. Economists have started questioning how resilient the economy will remain in the face of higher borrowing costs and global uncertainties.
Ivey PMI (June):
– Posted at 61.8 vs 52.1 prior – a surprising, sharp rebound
This jump indicates solid performance in Canada’s services and manufacturing sectors. However, markets largely shrugged off the positive print due to overriding fears about global trade disruptions.
Bank of Canada (BoC) Rate Outlook:
The BoC, which implemented its first quarter-point rate cut in June 2025, remains cautious. Governor Tiff Macklem stated that more evidence of disinflation is needed before aggressively lowering rates.
– Core inflation remains sticky around 2.6%—above the 2.0% target.
– Markets are divided over the timing of the next rate
Read more on USD/CAD trading.