USD/CAD price rebounds as trade war fears resurface amid tariff threats
USD/CAD surges to 1.4350 as tariff fears shake forex markets
The USD/CAD pair has broken its four-day losing streak, climbing toward 1.4350 in the Asian session on Monday. The gains in the U.S. dollar are largely driven by rising concerns over trade tensions after U.S. President Donald Trump announced plans to impose a 25% tariff on all steel and aluminum imports.
This move has rattled markets, particularly in Canada, which is one of the largest suppliers of these metals to the U.S.
President Trump, speaking aboard Air Force One on Sunday, confirmed that additional reciprocal tariffs would be introduced midweek, targeting countries with tariff structures that the US deems unfair. While no specific countries were mentioned, the impact on Canada is expected to be significant, given that it supplied 79% of total U.S. primary aluminum imports in the first 11 months of 2024. The announcement has weighed on the Canadian dollar, as investors anticipate economic repercussions for Canada’s trade and manufacturing sectors.
USD/CAD price dynamics (December 2024 - February 2025) Source: TradingView.
U.S. jobs data supports dollar as Fed rate outlook remains uncertain
The U.S. dollar found additional support from the latest Nonfarm Payrolls (NFP) report, which indicated slowing job growth but a lower unemployment rate. The Bureau of Labor Statistics (BLS) reported that 143,000 jobs were added in January, falling short of market expectations of 170,000 and significantly lower than December’s 307,000 figure. However, the unemployment rate edged down to 4.0% from 4.1%, fueling expectations that the Federal Reserve may delay rate cuts in 2025.
Meanwhile, the Canadian labor market outperformed expectations, adding 76,000 jobs in January—well above the expected 25,000. The unemployment rate improved slightly to 6.6%, beating forecasts of 6.8%. Despite this strong employment data, USD/CAD remains under upward pressure due to trade uncertainty and a stronger U.S. dollar.
Market outlook: Trade risks and monetary policy in focus
Investors will closely watch further developments in US trade policy, as Trump’s tariff plans could weigh heavily on the Canadian economy. Any retaliatory measures from Canada could add volatility to the USD/CAD pair. Additionally, market participants will look for further cues from the Federal Reserve’s monetary policy stance, with the next interest rate decision playing a key role in determining the pair’s trajectory.
On the basis of previously analyzed charts, USD/CAD has rebounded from support levels, with trade war fears supporting upside momentum. However, further gains will depend on how markets react to the upcoming U.S. tariff measures and whether Canada introduces countermeasures in response.
