Between the new tariff laws placed by the United States and the already declining valuation, economists predict that the Canadian dollar will decrease in value. Canadians are now worried about the devaluation of the Canadian dollar and many are unsure of its stability. Experts are predicting that the loonie will weaken during the year with projections ranging from 1.45 CAD to 1.50 CAD. However, an expert macro strategist Tiago Figueriredo said, “Concern remains around monetary policy divergence with the US, [but] given the headwinds facing the Canadian economy, the divergence is justified and will likely come alongside some weakness in the Canadian dollar,”. Figueriredo’s statement acts as a consolation for Canadians; the devaluation may be beneficial for our economy.

            Trump’s Tariffs are also a growing concern for Canadians. Not only would prices of goods increase tremendously, it also will inadvertently devalue the Canadian dollar. The new 25% tariff would add trade barriers between the nations thus the number of goods exported to the US will decrease. Currently, an approximate 1 trillion dollars worth of goods are exported from Canada, ⅓ of them being to the US. It is inferred that the trade ban would reduce investor confidence as Canada would be more vulnerable to external shocks. They may seem more inclined to invest in countries that are able to maintain stability in their GDP. The reduced exports will also lower the GDP of the nation. US exports make up an approximate 2% of our GDP. Trump’s tariffs will cause a significant decrease in our GDP, increase our cost of goods and it will also devalue the Canadian dollar.

            Other disadvantages of the Canadian dollar include higher rates from the Bank of Canada due to the inflationary impact. This would also impact consumer spending power which would in turn lower real wage growth.

            Although, economists agree that there are some benefits to the devaluation of the Canadian dollar. A weaker Canadian dollar will make Canada’s exports more competitive according to economist Nakamura. “A weaker loonie would help offset the impact of any tariffs, even as they make Canadian imports more expensive.” Rees, an economist, says.

            Canadian citizens need to watch out for the upcoming news about the Devaluation of the Canadian dollar to make informed decisions about money and investments.