Canadian Dollar Falls to Two-Week Low Amid Trump’s Announcement of 35% Tariffs on Canadian Imports – USMCA Exemptions Remain
July 11, 2025 — The Canadian dollar slipped to a two-week low against the US dollar following former President Donald Trump’s announcement of a new 35% tariff on imports from Canada. The tariffs are set to take effect from August 1. However, tariffs on goods covered under the United States-Mexico-Canada Agreement (USMCA) will remain exempt, easing some concerns in the market.
Trump Announces 35% Tariffs on Canadian Imports
In a recent statement, Donald Trump declared that the United States will impose a 35% tariff on imported goods from Canada, citing concerns related to fentanyl inflows as part of the rationale behind this move. However, he left room for potential tariff reductions if Canada takes more effective steps to curb the flow of fentanyl into the United States.
This announcement has introduced new trade tensions between the two neighboring countries and created immediate volatility in currency markets.
Impact on the Canadian Dollar
Following the tariff announcement, the Canadian dollar (CAD) depreciated sharply, dropping approximately 0.6% against the US dollar (USD). This marked the lowest level for the CAD since June 27, a period of roughly two weeks. The sudden decline reflects investor concerns about the potential economic impact of the tariffs on Canada’s export-driven economy.
USMCA Tariff Exemptions to Continue
Despite the tariffs targeting Canadian imports, US government officials have clarified that products covered under USMCA will continue to be exempt from these duties. The agreement, which governs trade between the United States, Canada, and Mexico, includes key sectors such as steel, aluminum, automobiles, household appliances, and apparel.
This reassurance helped somewhat stabilize the Canadian dollar, which narrowed its losses following the initial sell-off.
Market Reaction in Currency Pairs
In addition to the CAD/USD movements, the Canadian dollar strengthened against the Japanese yen (JPY), regaining ground to trade around the 107.10 yen level, erasing some earlier declines triggered by the tariff news. Meanwhile, broader currency markets have shown mixed reactions as traders evaluate the implications of the tariffs and ongoing international trade developments.
Outlook
The introduction of tariffs by the Trump administration has injected uncertainty into North American trade relations. While exemptions for USMCA products provide some relief, the broad 35% tariffs could weigh on Canadian exports and economic growth if maintained or expanded.
Market participants will be closely monitoring Canada’s response regarding fentanyl control measures and any follow-up statements from US trade authorities for signs of further adjustments or negotiations.
This report is brought to you by MINKABU PRESS, part of the Smart Money Mindset editorial team specializing in financial market news and analysis. For more updates, visit our FX and market news sections.