▲ U.S. President Donald Trump
Concerns are rising over a potential escalation of a "tariff war" between the U.S. and Canada as U.S. President Donald Trump took issue with the exchange rate between the U.S. and Canadian dollars.
On the 6th (local time), President Trump posted on his social media platform Truth Social, saying, "The imbalance between the U.S. and Canadian dollars is unacceptable," adding, "It has been that way for years, but no longer."
Both the United States and Canada use the dollar as their currency unit.
The current exchange rate stands at 1.38 Canadian dollars (CAD) per 1 U.S. dollar (USD).
Both countries have adopted a floating exchange rate system driven by supply and demand in the foreign exchange market.
Although President Trump did not explicitly specify what he meant by the "imbalance" between the two currencies, he is believed to be pointing to the recent trend of the Canadian dollar weakening against the U.S. dollar.
In the 2010s, the Canadian dollar traded at roughly a 1:1 parity with the U.S. dollar, but has since shown a weakening trend.
According to statistics from the Bank of Canada, the annual average exchange rate rose from 1.25 Canadian dollars per U.S. dollar in 2021 to 1.40 Canadian dollars last year.
Generally, a higher exchange rate is considered favorable for exports because it provides price competitiveness in the destination country.
It is possible that President Trump perceives that Canada is gaining an unfair advantage in trade with the U.S., and that the weakness of the Canadian dollar has played a part in this.
President Trump's remarks on the exchange rate came while the U.S. administration imposed a 50% tariff on approximately $20 billion worth of Canadian imports on August 22nd, and Canadian Prime Minister Mark Carney announced plans to implement retaliatory tariffs of the same scale starting on the 8th.
Consequently, speculations are emerging that the Trump administration may take additional measures during negotiations with Canada citing the weak Canadian dollar, or alternatively, pressure Canada to revalue its currency.
(Photo: Getty Images)
※
Copying, redistribution, and unauthorized use in AI training are strictly prohibited.