The Canadian dollar strengthened to around 1.38 per USD in September, largely reflecting broad-based weakness in the US currency. At the same time, Canada’s retaliatory tariffs on US goods took effect after Prime Minister Mark Carney’s government failed to reach an agreement with Washington last month.
The counter-tariffs apply to approximately $20 billion worth of US exports, with duties ranging from 15% to 50% on products such as steel, furniture, clothing, and electronics. These measures follow US tariffs introduced last month that targeted about $20 billion—roughly 5%—of Canadian exports to the United States, including wine, furniture, dairy products, cement, clothing, fishing rods, and hockey equipment.
The loonie has also been supported by firmer crude oil prices, consistent with Canada’s role as a major energy exporter. Additional upside risks to oil prices persist as Iran threatens to strike regional energy infrastructure in response to US actions. Rising energy prices could in turn stoke inflationary pressures, potentially prompting a tighter policy stance from the Bank of Canada.