Canada’s trade deficit in March narrowed to C$506 million compared to expectations of widening to C$1.56 billion. The improvement comes on the back of a larger decline in imports, that fell 1.5 percent to C$70.40 billion. In the future, Canada’s trade balance will be shaped by economic conditions, trade policies, and commodity prices.
In March 2025, the Trump administration made a major policy change. They imposed a 25 percent tariff on aluminum and steel imported from Canada. This decision reverberated throughout the trade landscape, fundamentally altering the dynamics of commerce between the two nations. In response, Canada acted decisively by cutting its imports from the United States by 2.9 percent. This move highlights the growing tensions between these neighboring countries. Canadian businesses are currently facing challenges due to ongoing trade disputes. As a result, they are seeking alternative markets. This strategy aims to mitigate the adverse effects of tariffs. This search for new opportunities shows a strategic shift. It aims to sustain operations and ensure long-term viability in a complex global trade environment.
Resolving the trade dispute with Canada and the U.S. will not be something that can be done in the short term. The strategy is multi-faceted with emphasis on long-term structural reforms, diplomacy, and economic pragmatism. Goals that we believe will need to happen are:
- Negotiation leverage allowing Canada to reduce reliance on U.S. trade
- Addressing U.S. domestic concerns while protecting key Canadian exports will need to occur
- Co-developing EV battery plants or semiconductors across U.S.-Canada borders
- Reducing public pressure on policymakers to adopt populist protectionist measures
Technical Analysis
On the daily time frame, the greenback versus the Canadian dollar has broken out of its descending channel that stayed intact since February to March of 2025. With the pair now reaching support on the weekly chart as shown below, a break back above 1.36 on the daily chart will confirm bullish bias. Key levels to watch are 1.37 (immediate resistance), 1.36 (immediate support), and 1.3360 (2023-2024 support base).
USD/CAD Weekly Chart
The USD/CAD is currently trading at pivotal weekly support. As long as price action remains above trend line support, bulls will look for a return back towards 1.48 in the coming weeks. MACD is also negative (below signal), further signaling bearish momentum. For bulls looking for reversal from support and confirmation of new uptrend, the MACD turning bullish will be one of the first signs.
Upcoming economic events on the docket that traders should keep an eye on are Canada’s job report and U.S. consumer price index. Both could also serve as a catalyst to move market direction either way.
Explore More on Sigmanomics
Financial News | Stock News | Forex News | Crypto News | Economic Calendar
Written by Sigmanomics team
Read more
