Economic Outlook and Summary
Trump’s trade tirade scorched the earth in March—his tariffs sparked retaliatory threats from China, a diplomatic cold front with Mexico, and Canada. Trump nailed Canada and Mexico with 25% tariffs on March 4, and he promised to add auto tariffs on April 2, which he called “Liberation Day.” His remarks fueled discussions of recession risks in the U.S., as well as speculation about the impact of tariffs on U.S. inflation.
The U.S. Dollar Index (DXY) was on the defensive for all of March, and then Trump’s April 2 imposition of a minimum 10% tariff on goods imported into the U.S. from 60 countries accelerated the DXY decline.
Gold rallied on safe-haven demand and made a new record high of 3167.71 on April 3.
Equity traders are dumping U.S. stocks aggressively. The S&P 500 fell from 5986 to 5461 on April 3, in the wake of Trump’s sweeping tariff announcement. The U.S. 10-year Treasury yield dropped to 4.05% on April 3, from 4.40% on March 27, in a stampede to buy safe-haven assets.
April will be ruled by U.S. data that points to a slowing economy and by how 60 countries react to Trump’s tariff assault.
The Canadian Dollar and Bank of Canada
The Canadian dollar churned inside a USDCAD band of 1.4240 to 1.4540 as traders digested the implications of threatened auto tariffs against speculation that recessionary fears would force the Fed to cut interest rates.
The Bank of Canada cut its benchmark rate by 25 bps on March 12 and justified the move because inflation was close to its mandated 2.0% target. Governor Tiff Macklem suggested that further rate cuts were up in the air due to the “pervasive uncertainty” created by tariff threats.
The economic outlook remains hostage to U.S. political lunacy and a weak Canadian economy, as productivity remains in the dumpster. President Trump omitted Canada from his tariff barrage on April 2, but he left the existing tariffs on aluminum, steel, potash, and lumber in place. Those products are covered under the USMCA agreement on trade, and Canadian politicians have said they would retaliate.
The Canadian dollar is rallying on equity market weakness and widespread U.S. dollar selling. However, concerns about how Trump will react to any Canadian tariff retaliation suggest USDCAD downside may be limited to the 1.3960 area.
Oil Prices
Crude oil crumpled in late March as it became obvious that OPEC+Russia’s production boost was ill-timed. April began with WTI hovering around $64, down from its recent peak near $75. China’s stubbornly sluggish recovery, plus rising inventories in the U.S., is dampening demand expectations even further.
If that wasn’t enough, traders are worried that a prolonged trade war could knock 0.5% off global GDP—crushing fuel demand at the same time supply ramps up. Unless a geopolitical flare-up or a surprise supply cut emerges, oil bulls may remain on the endangered species list this month.
Bank 2025-USD/CAD Q2 2025-USD/CAD Q3
Scotiabank* 1.4300 1.4500
BMO 1.4500 1.4800
CIBC 1.4300 1.4500
TD Bank* 1.4900 1.4900
National Bank 1.4500 1.4200
*Forecast is based on last month. Does not include post Tariff moves. Forecast Table is for mid-market rates, and subject to change anytime.
