The Canadian dollar weakened against the US dollar and a number of other major peers on Tuesday after the United States decided to impose higher duties on lumber coming from Canada. Traders preferred to stay off the market ahead of a highly anticipated report on Canadian retail sales in February that is due to be released tomorrow.
The US Department of Commerce had an investigation of Canadian softwood lumber imports, which concluded that these imports are unfairly subsidized by the Canadian government. As a result, Washington decided to impose countervailing duties that will range from 3% to 24% on softwood lumber imports starting next week to allow producers in the United States a fair competition.
US Commerce Secretary Wilbur Ross stated that Canadian imports of softwood lumber, which are valued about $5 billion, represent 31.5% of the total US market, thus imposed duties will have a large effect. The decision to impose additional duties will also retroactively affect Canadian imports shipped over the past 90 days by any company except the biggest four Canadian lumber importers. These importers are West Farser Timber, Tolko Industries, Canfor, and Resolute Forest Products.
The new decision follows decades of calls from the US lumber industry that attempted to highlight the way which the Canadian government uses to subsidize lumber prices, which have harmed US producers. However, Canada disagreed with the decision as Natural Resources Minister Jim Carr and Foreign Affairs Minister Chrystia Freeland said in a joint statement that the accusations are baseless.
Traders became concerned that this could be a prelude to stronger changes in trade relationships between the United States and Canada, even though the two countries previously had similar disagreements. A tweet from US President Donald Trump raised worries that dairy farmers in Canada could be targeted next as the tweet said that Canada has made business difficult for dairy farmers in Wisconsin.
USD/CAD traded at 1.3587 as of 17:45 GMT on Tuesday from 1.3624 at 15:35 GMT, the pairâs highest level since February 2016. USD/CAD began trading today at 1.3548. GBP/CAD was at 1.7429 after touching 1.7487 at 15:35 GMT, a level last seen on September 13. GBP/CAD started todayâs session at 1.7314.
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