The Canadian dollar, also referred to as the “Loonie,” has gone through an incredible rise and fall, exemplifying the fluctuations that have occurred in currency markets over these turbulent times. On Monday, the Loonie sank to its lowest level in over two decades, falling below 68 cents U.S. as concerns about U.S. President Donald Trump’s 25% tariffs were looming in the background. However, it was not long before the Loonie recovered in a big way, surging by more than 2.5% on news of a temporary reprieve on the tariffs. This roller-coaster currency ride reflected not only the uncertainty surrounding trade relations between Canada and the U.S. but also the complex factors that influence the currency market.
The Early Struggles of the Loonie
The Canadian dollar began Monday’s trading session on a sour note, opening at a level not seen in more than 20 years. The Loonie slumped to an intraday low of 67.8 cents U.S. during the early hours of the trading day, as the markets reacted to the looming threat of U.S. tariffs. For those tracking currency trends, this dramatic fall was reminiscent of the economic struggles Canada experienced during the early 2000s.
Among the key factors triggering this drastic downfall was uncertainty on U.S. trade policies. This came with President Donald Trump’s unpopular declaration of placing 25% tariffs on Canadian imports. Given the reliance of the Canadian economy on trade with the U.S., the prospect of such a measure posed a legitimate threat of upending it. As such, the concern arose that the economy of Canada would be so harshly hit as to lead to a bleak prospect for the Canadian dollar.
“Currency markets are having another round of whiplash,” Karl Schamotta, chief market strategist at Corpay, noted. According to Schamotta, the fall in the Loonie was more pronounced with a broader sentiment shift in the market as jitters over trade tensions with the U.S. dented investor confidence. “The threat of a catastrophic blow to the Canadian economy loomed large, and it reflected in the currency’s dramatic fall,” Schamotta added.
The Reprieve and the Recovery
The setback notwithstanding, the Canadian dollar went on to make a significant jump later in the day, thus reversing its negative trend. This was after Canadian Prime Minister Justin Trudeau had a phone call with U.S. President Donald Trump, following which the latter declared a 30-day delay before the imposition of tariffs. Investor sentiment was relieved by this surprise reprieve, and the Loonie went on to gain more than 2.5% against the U.S. dollar.

The delay in tariffs was an initial sigh of relief for the killing impact the tariffs had on the Canadian economy. The loonie surged to 69.5 cents U.S. by the end of the trading day based on this news. It was seen making a strong comeback from previous lows, even though it remains below the level at which it opened the week.
Schamotta reported that the reprieve on tariffs “lifted the Canadian dollar by about 100 basis points,” leaving it “flat relative to Friday’s open.” Still, he exercised caution in the optimism, citing that the reprieve was short-term and that the situation remains volatile. “More turbulence lies ahead for the currency,” he cautioned. “While today’s reprieve has eased immediate fears, it’s unclear how long it will last.”
The Implications to the Canadian Economy
Though reports of the pending delay in this tariff may come as a timely respite for the Canadian currency, experts take precautions regarding greater economic implications from the trade issue. An increased and prolonged war of tariffs on trade between the U.S and Canada can remain devastating for Canadian economic prospects generally, especially were tariffs to gain full effect in both countries.
The loonie has come under pressure since the election of Donald Trump in the United States in 2016. For the past years, the Canadian dollar has depreciated by around 4.15% relative to the US dollar, while earlier in the day, the loss was around 5.25%. However, the relief provided by this reprieve might be short-lived, as economists say that the long-term stability of the Canadian dollar will largely depend on how the trade dispute unfolds and what the overall economic landscape looks like.
The Bank of Canada has been especially careful about the risks that trade uncertainty poses. Bank of Canada Governor Tiff Macklem has described U.S. tariffs as a “major uncertainty” for the Canadian economy, and the central bank has said it will pay close attention to developments related to the tariffs. In a recent statement, the Bank of Canada acknowledged that if tariffs were imposed on a broad basis, it would “test the resilience of Canada’s economy.”
To this end, Macklem indicated that the Canadian economy would face further shocks if the trade dispute persisted. “We will follow developments closely and assess implications for economic activity, inflation, and monetary policy in Canada,” he stated.
The Future Prospects for the Loonie
Future prospects for the Canadian dollar remain precarious as it tries to traverse the intricacies of the trade dispute with the U.S. Currency watchers have even forecast for the Loonie to even go as low as 66 cents U.S. if completely implemented and over six months to be in an all-out dispute on trade terms. This should worsen troubles for Canada’s economy, where the global one begins to see slowdown due to increasing trade hostilities.
Moreover, the larger global economic scenario continues to play a huge role in what direction the Canadian dollar will head into the future. For instance, the strong U.S. dollar has also been one of the concerns among currency traders. The U.S. dollar index, which gauges the U.S. dollar against a basket of major currencies, has continued on an upward trajectory recently and adds pressure to the Canadian dollar.

In a note on Monday, economist David Rosenberg of Rosenberg and Associates pointed out that the strength of the U.S. dollar reflects broader global trends. “The U.S. dollar is stronger across the board,” said Rosenberg, suggesting that the Trump administration’s tariffs could further strengthen the appeal of the U.S. dollar as a safe haven asset. This may increase the demand for the greenback, which would negatively affect the Canadian dollar in the long run.
The effect of U.S. tariffs on global trade and the U.S. dollar is a concern for Canadian economists. Derek Holt, vice-president and head of capital markets economics at the Bank of Nova Scotia, wrote that tariffs may, in the end, further make the U.S. dollar attractive, meaning the U.S. trade deficit will continue growing, which has already become an issue for the Trump administration. “He’ll do more to strengthen the dollar, and on we keep going with the usual lagging effects,” Holt said.
FAQs: Common Questions about the Canadian Dollar’s Recent Turbulence
Why did the Canadian dollar plunge below 68 cents U.S.?
The Canadian dollar was forced below 68 cents U.S. when the President of the United States, Donald Trump, threatened a 25 percent tariff imposition, thus making one feel uncertain whether a 25 percent tariff might cause significant blows to Canada’s economy, triggering the selling off of the Canadian dollar.
Why did the Canadian dollar bounce back?
After the announcement of a 30-day reprieve on tariffs by U.S. President Trump and Canadian Prime Minister Trudeau, the Canadian dollar recovered. This alleviated immediate concerns about the economic impact of the tariffs and boosted investor confidence in the Canadian currency.
How has the U.S. dollar affected the value of the Canadian dollar?
The U.S. dollar has risen by a lot over the past months, and some of the factors that have been seen to be behind this are tariffs. A stronger U.S. dollar is what has pressured the Canadian dollar even further downwards.
How do tariffs affect the Canadian economy?
The tariffs would significantly damage the Canadian economy because they increase the cost of U.S. imports and disrupt trade relations. The Bank of Canada has expressed concerns about how tariffs would test the resilience of Canada’s economy.
What is the future outlook for the Canadian dollar?
The immediate outlook for the Canadian dollar remains uncertain, with most analysts willing to forecast some additional weakness if this trade dispute is not resolved soon. The currency remains vulnerable to shifts in U.S. trade policy, economic conditions, and the broader global environment.
All things considered, recent dramatic fluctuations of the Canadian dollar reflect deep uncertainty surrounding trade relations between Canada and the U.S. As long as tariffs are a possibility, the future will be bumpy for the Canadian economy and for the Loonie.


I am Aparna Sahu
Investment Specialist and Financial Writer
With 2 years of experience in the financial sector, Aparna brings a wealth of knowledge and insight to Investor Welcome. As an accomplished author and investment specialist, Aparna has a passion for demystifying complex financial concepts and empowering investors with actionable strategies. She has been featured in relevant publications, if any, and is dedicated to providing clear, evidence-based analysis that helps clients make informed investment decisions. Aparna holds a relevant degree or certification and is committed to staying ahead of market trends to deliver the most up-to-date advice.