The Canadian dollar has weakened to its lowest level since early 2025, when U.S. President Donald Trump announced tariffs on Canadian exports.
The loonie fell to around 70 cents to the U.S. dollar by June 25, and stayed at the same level the next day. Previously, it had briefly dropped to 68 cents in February 2025 as the United States announced protectionist trade policies.
At the same time Canada’s dollar declined, the U.S. dollar’s strength reached a one-year high this week, after Federal Reserve Chair Kevin Warsh centred his June 17 news conference around fighting rising inflation. While the Federal Reserve kept interest rates steady, higher rates would directly strengthen the U.S. dollar.
U.S. inflation for the month of May came in at 4 percent, while in Canada it was at 3.2 percent.
Bank of Canada Governor Tiff Macklem said during the June 10 rate decision that persistently high energy prices could put upward pressure on inflation, which would require higher interest rates to strengthen the Canadian dollar. At the same time, he said new U.S. tariffs on Canada could further weaken its economic growth and warrant rate cuts, which he said poses a dilemma for the bank.
Macklem’s comments came a week after Statistics Canada reported that Canada’s economy shrank for two straight quarters on an annualized basis, meeting the common definition of a technical recession.
The C.D. Howe Institute’s Business Cycle Council, widely seen as the authority on recessions in Canada, later said it was too early to conclude whether the country had entered a recession.
While a weaker loonie will lower Canadians’ purchasing power and make imported goods from the United States more expensive, it could benefit tourism and manufacturing exports.
