'They Asked Too Much': the Loonie Slides as Canada and the US Head for a Trade War

The Canadian dollar fell after trade talks between Ottawa and Washington collapsed, leaving both countries facing higher prices across a wide range of imported goods and threatening Canadian growth.

The US imposed 50% tariffs on around $20bn of imports from Canada — its second-largest trading partner after Mexico — covering dairy, wine, wood products, furniture, cement, ceramics and much else.

The retaliation

Prime Minister Mark Carney said Canada would respond "dollar for dollar" with tariffs beginning 8 September, targeting steel, dairy, agricultural equipment, paper and electronics. Details were promised "in the coming days."

The loonie fell 0.58% against the US dollar in morning trading and also slipped against the euro, pound and yen.

How it fell apart

Negotiators had been working through the week. The tone soured over the weekend, with each side blaming the other for the failure and for unfair trade practices. US Trade Representative Jamieson Greer said a deal had been within reach.

The asymmetry

Dollar-for-dollar sounds like parity and is not. Canada sends roughly three-quarters of its exports to the United States; the US sends a far smaller share of its own the other way.

Equal tariff totals therefore represent very different fractions of each economy, which is why the currency moved on the news and why the pressure to settle is not distributed evenly between the two capitals.