Image © Bank of Canada
A new analysis confirms CAD is effectively 'fully priced' for U.S. tariffs.
The Canadian Dollar could prove an outperformer in April as the U.S. puts heat on other countries as it widens its tariff crusade.
Initial skirmishes in the global trade war focused on Canada, Mexico, and China, prompting a significant FX recalibration that markedly lowered the CAD and MXN, particularly against European currencies.
But now, Barclays thinks Canada will prove more resilient in the event of further escalation in tariffs as a more significant portion of trade between the U.S. and Canada is USMCA-compliant.
"A c.6% tariff premium is already in CAD," says Sheryl Dong, an analyst at Barclays. "This makes CAD more resilient in case of a further escalation in the trade war."
Furthermore, the research finds Canada’s exposure is notably exempt in sectors like oil, energy, and potash, which helps limit the downside.
The White House's April 02 tariff announcements will be the biggest yet as the U.S. looks to reciprocate the tariffs imposed on its exports by other countries.
However, and crucially, the U.S. will extend this to 'non-trade tariffs' such as Value Added Tax (VAT).
This means many countries, including the UK, that apply this sales tax, are brought into scope for tariffs, allowing CAD to slide out of the limelight.
Analysts at Citibank and JP Morgan warn Q2 will see the U.S. Dollar rebound, with analysts confirming they think tariffs will be a supportive factor for the USD, even if price action since February has defied that notion.
This also has implications for CAD as it has underperformed alongside USD in 2025; any USD rebound will also bolster the Canadian unit.