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Tariff risks cloud Canadian dollar outlook as sentiment turns negative
Commerzbank says tariffs on US cars will double from 25% to 50% starting Jan. 1, 2027, and the effect on Canada could extend beyond the final effective tariff rise.
FXStreet highlights Commerzbank analysis from Michael Pfister linking higher US auto tariffs to a weaker outlook for the Canadian dollar, with the impact tied to whether USMCA protection applies.
Pfister says the severity depends on USMCA coverage, but warns deteriorating sentiment could weigh on Canada’s real economy even if the effective tariff increase is limited. He notes the measures were announced well ahead of 2027, leaving potential room for negotiations before year-end.
Commerzbank points to the scope of the planned change, saying the US President announced a “fairly moderate” response by recent standards, with car tariffs scheduled to double from 25% to 50% from Jan. 1, 2027.
Pfister also argues sentiment mattered in prior episodes, adding that a further factor is that the US discussed its reliance on aluminium imports from Canada, which could support the case for talks. FXStreet adds that last Saturday’s measures were thought to have covered around USD 20 billion in goods.