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 further weighed on the loonie, which has been falling against the US dollar since September.
The loonie was at 71.07 US cents late in the morning after falling below 71 US cents earlier in the day.
BMO Capital Markets senior economist Robert Kavcic called the prospect of tariffs a pretty strong headwind for a currency already under pressure from domestic economic factors.
He points out that the Canadian dollar is already weakening due to the weaker economy and recent interest rate cuts by the Bank of Canada.
Donald Trump argued on the Truth Social network on Monday that he would impose a 25% tariff on all products from Canada and Mexico. He said the tariff would remain in place until both countries prevent drugs, particularly fentanyl, and people from crossing borders illegally.
