USD/CAD Hits Two-Month High After Trump Vows to Double Canadian Auto Tariffs

The move came after US-Canada negotiations over USMCA revisions stalled on auto rules of origin and dairy access. Bank of Canada data show vehicles and parts accounted for 18 percent of Canadian exports to the US in 2025, exposing the currency to targeted tariff risk rather than broad market sentiment. The USD/CAD pair rose to 1.392, its highest level since June, driven by direct trade exposure rather than US monetary policy divergence. Primary records from the Office of the US Trade Representative confirm the tariff threat targets the same sector covered by existing 25 percent Section 232 duties. Canadian officials responded by citing retaliatory authority under the Customs Tariff Act without specifying measures. The ledger shows the US gains short-term leverage on supply-chain relocation while incurring higher vehicle prices and potential supply disruption for its own assembly plants. Canada faces immediate export compression but retains scope to redirect output toward Mexico under current USMCA provisions. Next steps hinge on whether the tariff increase is formalized in a Federal Register notice before the November midterm window closes.