USD/CAD slipped to around 1.3690 on Friday as the US Dollar gave back earlier gains, while the Canadian Dollar held steady. Even so, the pair was still on track for small weekly gains after the US Supreme Court struck down President Donald Trump’s global tariffs.
In a 6–3 ruling, the Court said Trump went beyond his authority by using the International Emergency Economic Powers Act to impose broad import duties. The Court did not rule on tariff refunds. The Penn Wharton Budget Model estimates refund claims could top $175 billion.
Tariff Ruling Keeps Markets On Edge
Uncertainty stayed high because Trump said he may seek other legal ways to keep tariffs in place. Markets also digested fresh economic data from Canada and the United States.
Canada’s Retail Sales fell 0.4% month-on-month in December, compared with expectations for a 0.5% drop, after a 1.2% rise in November. Retail Sales excluding autos rose 0.1%, beating forecasts for a 0.3% decline, but slowing from 1.6%.
US GDP rose at an annualised 1.4% in Q4 2025, down from 4.4% and below the 3% forecast. Core PCE increased 0.4% month-on-month and 3.0% year-on-year. Headline PCE also rose 0.4% month-on-month and 2.9% year-on-year.
February S&P Global Composite PMI slipped to 52.3 from 53. Manufacturing came in at 51.2 and Services at 52.3. University of Michigan sentiment fell to 56.6, while 1-year and 5-year inflation expectations eased to 3.4% and 3.3%.
Outlook For Usdcad Volatility Ahead
The Supreme Court decision adds major uncertainty and is a clear bearish driver for the US dollar. USD/CAD may stay volatile in the coming weeks as markets digest what comes next. The unresolved вопрос of more than $175 billion in possible refunds is enough on its own to keep traders cautious.
A useful comparison is 2018–2019, when these same tariffs led to sharp swings and instability for the Canadian dollar. Removing them is broadly positive for Canada, which depends heavily on trade with the United States. More than 75% of Canadian exports go to the US. This history points to the potential for a sustained move lower in USD/CAD.
This shock also comes as US data has softened from late 2025 into the start of this year. GDP slowing to 1.4% and cooler PMI readings support the case for a weaker US dollar. The main counterpoint is sticky Core PCE inflation at 3.0%, which may limit how soon the Federal Reserve can cut rates.
With a strong bearish catalyst on one side and stubborn inflation on the other, options may be a practical way to trade the view. Buying USD/CAD put options positions for downside while limiting risk if the Fed stays hawkish. This approach benefits if the tariff reversal and weaker growth outweigh inflation concerns.
The interest rate gap that has supported the US dollar is now under scrutiny as the US economy slows. With the tariff burden removed, the Bank of Canada may feel less need to match the Fed’s tight policy stance. Traders who are unsure about direction may prefer long-volatility setups, such as straddles, to benefit from a large move while the market decides which narrative wins.
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