USD/CAD holds ground near 1.4350, with an upside bias as trade uncertainties persist

USD/CAD may appreciate due to persistent trade uncertainties following China’s 100% tariff on Canadian imports.

Canadian Prime Minister Mark Carney may call an early election, possibly by late April or early May 2025.

The US Dollar struggles amid worries about a potential slowdown in the US economy.

USD/CAD remains steady after registering gains in the previous session, trading around 1.4360 during the Asian hours on Monday. The Canadian Dollar (CAD) may face headwinds due to ongoing trade uncertainties.

On Saturday, China announced that it will impose a 100% tariff on Canadian rapeseed oil, oil cakes, and peas, along with a 25% levy on aquatic products and pork from Canada. This move, in response to tariffs introduced by Canada in October, intensifies trade tensions and adds another dimension to the broader trade conflict largely driven by Trump's tariff policies. The new tariffs are set to take effect on March 20.

Last week, President Trump’s 25% tariffs on Canadian and Mexican imports took effect. However, on Thursday, a one-month exemption was introduced for goods that comply with North American trade pact standards, providing some relief.

Amidst this backdrop, speculation is growing that Canadian Prime Minister Mark Carney could call an election as early as Monday. While Canada’s next federal election is scheduled for October 20, 2025, an early call remains possible, potentially by late April or early May 2025.

US Commerce Secretary Howard Lutnick stated late Sunday that the 25% tariffs on steel and aluminum imports, scheduled to take effect on Wednesday, are unlikely to be delayed. Ordered by US President Donald Trump in February, the tariffs apply to imports from major foreign suppliers, including Canada and Mexico, and cover finished metal products, according to Bloomberg.

The US Dollar (USD) faces downward pressure due to concerns over a potential slowdown in the United States (US) economy. However, the downside of the Greenback could be limited as the US Treasury yields rise.

The US Dollar Index (DXY), which measures the US Dollar against six major currencies, is losing ground for the fifth consecutive day, is trading around 103.80 with 2- and 10-year yields on US Treasury bonds standing at 3.97% and 4.28%, respectively, at the time of writing.