Tuesday, March 13, 2018

A sigh of relief for Canadian dollar and stocks after Trump reprieves Canada from tariffs

The Canadian markets responded positively to the news that Canada got a provisional exemption from tariffs on steel and aluminum imports into the U.S., which came on March 8. The Canadian dollar rose from as low as 77 US cents on March 7 to 78 US cents in the days following the announcement. The S&P/TSX Composite Index gained almost 1% over a couple of days after the announcement.

 Source: tmxmoney.com
In the immediate aftermath of the announcement about the exemption from the tariffs, Canadian officials were cautiously optimistic that a mutually beneficial trade deal was possible. 

However, the dollar has been hesitant to reach the 80 US cents level, which was a reality only a month ago, and the rise in value of Canadian stocks has been quite subdued. This, at least partly, reflects the provisional nature of Canada’s exemption from the tariffs. Moreover, the bigger issue between Canada and its biggest trading partner, the U.S., the faith of the North American Free Trade Agreement (NAFTA), is still undecided.

As the past several days show, any hiccups or advancements in the NAFTA talks will most likely have a substantial effect on Canadian markets.

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