Trump says call with Trudeau went “very well”. Asked on tariffs, he said “watch”

It’s a pivotal day in Canadian dollar trading as the deadline for the US to impose tariffs on Canada nears. It would also kick off retaliatory tariffs by Canada and court challenges.

USD/CAD was trading at 1.4555 as the call with Trudeau and Trump got underway after having traded as high as 1.4793 — the highest level in 20 years. The pair dropped to 1.4500 on this headline from a CNN reporter who tweeted:

President Trump tells me his call with Prime Minister Trudeau went “very well.” Asked if the tariffs against Canada are still going into effect tonight, he said, “Watch.”

That’s not exactly a resolution but “very well” certainly sounds like more good news than bad. Here’s a look at the one-minute chart:

Today officials from the White House have repeatedly stressed that a deal is all about doing more to prevent drugs and migrants from entering the US but Trump’s own words about Canada have ranged from trade deficits to bank to agriculture to annexing Canada.

Trump earlier today asked about Canada: “I look at some of these trade deals and I say ‘who the hell made these deals’ they’re so bad.” In fact, it was him who signed the deal.

Mexico struck a one-month standstill with Trump today and is now entering into negotiations with the US. Those talks appear to be broader than drugs as the US President has touted the inclusion of Secretary of Treasury Scott Bessent and Secretary of Commerce Howard Lutnick.

With Canada, any set of tariffs will surely be negotiable and could be removed quickly — maybe within hours — or left on for an extended period. CIBC today looked at how the Canadian economy would fare during a 5-month tariff war. Of course, there are many second order effects to consider with Canada’s government (or what’s left of it) talking about covid-style stimulus and BMO forecasting six further Bank of Canada rate cuts in the event of a trade war.

We could also see court and congressional challenges to Trump’s ability to place broad tariffs on an ally with a trade agreement, along with challenges within the USMCA. If those are successful, they could limit Trump’s ability to threaten others — particularly in Europe — with tariffs.

This article was written by Adam Button at www.forexlive.com.