USD/CAD price strengthens as Trump expands tariffs on steel and aluminum
USD/CAD climbs amid trade tensions and Fed rate cut delay
The USD/CAD pair extended gains for the second consecutive day, trading near $1.4330 during Asian market hours on Tuesday. The move comes as U.S. President Donald Trump intensified trade measures, imposing a flat 25% tariff on all steel and aluminum imports.
The removal of country-specific exemptions has heightened trade war fears, leading to a stronger U.S. dollar and downward pressure on the Canadian dollar (CAD).
Trump’s administration confirmed that the new tariffs will take effect on March 4, with potential additional levies on microchips and vehicles under consideration. The decision aims to revive struggling U.S. industries, but the retaliatory risks could weigh on global trade.
USD/CAD price analysis (August 2024 - February 2025) Source: TradingView.
Canadian dollar under pressure despite strong labor data
Canada, which supplied 80% of U.S. aluminum imports in 2024 and accounted for 23% of U.S. steel consumption, is expected to face economic challenges as a result of the policy shift. Canadian Industry Minister François-Philippe Champagne criticized the tariffs as “totally unjustified” and hinted at potential countermeasures.
Despite trade risks, the Canadian dollar rebounded from 22-year lows of 1.4550, supported by stronger labor market data. The unemployment rate unexpectedly fell to 6.6% in January, defying forecasts of 6.8%, easing concerns about labor market weakness. However, the Ivey PMI dropped sharply to 47.1 from 54.7, its lowest level since December 2020, reinforcing expectations for monetary policy easing from the Bank of Canada.
Fed outlook supports the U.S. dollar
The U.S. dollar Index (DXY) rose for the fourth consecutive session, nearing 108.50, as expectations for Federal Reserve rate cuts weakened. January’s Nonfarm Payrolls report, which showed slowing job growth but a lower unemployment rate, reinforced speculation that the Fed will delay rate cuts until the second quarter.
A Reuters survey of economists suggests a rate cut may not happen until June, shifting previous expectations for a March decision. With rising inflation concerns and a stronger dollar, USD/CAD could maintain its bullish trajectory in the near term.
On the basis of previously analyzed charts, USD/CAD remains in an uptrend, with 1.4370 as key resistance. A break above this level could push the pair toward 1.4450, while a downside correction may find support at 1.4280.
