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USDCAD falls despite US-Canada tariff escalation
Even after US talks broke down on August 21 and the US imposed 50% tariffs on about 5% of Canadian imports, USDCAD moved lower, trading below the 50% midpoint of the 2026 range.
A growing US-Canada trade dispute has not lifted USDCAD, as the Canadian dollar strengthened against the US dollar even as tariff headlines worsened, according to Forexlive. The pair is moving lower and is below the 50% midpoint of the 2026 trading range, a divergence from what many traders might expect given the negative trade backdrop for Canada.
Forexlive notes that trade negotiations broke down on August 21, prompting the US to impose 50% tariffs on about 5% of Canadian imports. Canada responded this week with tariffs of 15%, 25%, or 50% on approximately $20 billion of US goods, and the US added pressure with restrictions on certain Canadian dairy products, motorcycles, and most alcoholic beverages beginning September 29.
The dispute is particularly sensitive for Canada because more than 70% of Canadian exports go to the United States, Forexlive says, which typically would be seen as negative for the Canadian economy and the Canadian dollar. However, price action after the breakdown in negotiations suggests the immediate market response differed from the fundamental narrative.
Forexlive points to technical developments around August 21, saying USDCAD initially moved higher after the talks collapse, then pushed back above its 200-day moving average near 1.3836 and later above its 100-day moving average near 1.39235. The takeaway highlighted is that, at times, fundamentals can conflict with what the market is doing in real time.