The Canadian dollar climbed to its highest level in about two and a half months on Wednesday. This happened after United States President Donald Trump temporarily delayed a new round of steep tariffs on Canadian goods.
According to the Associated Press, Trump announced a three-day delay to planned 50 per cent tariffs covering about $20 billion worth of Canadian imports. This came after last-minute negotiations between Washington and Ottawa.
The development eased immediate concerns of another escalation in the trade dispute between the neighbouring countries.
Canadian currency gains ground
The Canadian dollar strengthened by about 0.5 per cent to 1.3823 against the US dollar, equivalent to approximately 72.34 US cents.
It marked the currency’s strongest position since June 2.
The loonie also benefited from broader weakness in the US dollar. Investors assessed developments in the bond market and expectations surrounding American monetary policy.
Trump gives negotiations more time
The tariffs had been scheduled to take effect before Trump announced the temporary reprieve.
Trump said the two countries had made enough progress towards an agreement to justify giving negotiators three additional days.
The decision prevented the immediate imposition of the 50 per cent duties. It also provided more time for both governments to work towards a wider trade agreement.
Canada remains cautious
Canadian Prime Minister Mark Carney acknowledged progress in the discussions but stopped short of declaring that a final deal had been reached.
Canadian officials have continued negotiations with their American counterparts as both countries attempt to resolve longstanding disagreements over trade.
The threatened tariffs have added to tensions between two economies that maintain one of the world’s largest bilateral trading relationships.
Markets watch next move
Investors will now closely follow negotiations during the three-day extension to determine whether the reprieve develops into a longer-term agreement.
Failure to reach a settlement could revive concerns over tariffs and place renewed pressure on the Canadian currency.
For now, however, the temporary pause has provided relief to financial markets and helped push the Canadian dollar to its strongest level in more than two months.
