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The Canadian dollar fell to its lowest level since May 2020 after Donald Trump threatened to impose tariffs on Canadian goods shipped to the United States once he takes office in January.
The threat of tariffs added a further drag on the loonie, which has been moving lower against the U.S. dollar since September.
The loonie was at 71.07 cents US in late-morning trading after dipping below 71 cents US earlier in the day.
BMO Capital Markets senior economist Robert Kavcic called the prospect of tariffs a pretty stiff headwind for a currency that’s already under pressure from domestic economic factors.
He says the Canadian dollar was already weakening because of the softer economy and recent interest rate cuts by the Bank of Canada.
Trump posted to Truth Social on Monday that he will impose a 25 per cent tariff on all products from Canada and Mexico. He said the tariff will remain in place until both countries stop drugs, in particular fentanyl, and people from illegally crossing the borders.