Posthaste: Why these 'nail-biting' TD Bank economists are worried about the Canadian dollar

financialpost.com:

Donald Trump will no doubt have wide-ranging implications for the global economy, interest rates and how currencies respond to the U.S. dollar as he assumes control.

Since Canada is very aligned with its largest trading partner, it’s easy to understand why economists at Toronto-Dominion Bank are looking askance at the Canadian dollar‘s prospects if Trump begins to wield his arsenal of promised trade policies.

“It would not surprise us to see the loonie break below 70 cents (U.S.),” TD Bank economists said in a report the day after the U.S. election.

The Canadian dollar fell perilously close to that level on Wednesday, retreating almost one per cent to 71 U.S. cents before regaining some strength Thursday.

The loonie was the victim Wednesday of a surging U.S. dollar, which recorded its best day against major currencies since 2020, as markets digested the Republican candidate’s win. Traders got a jump start on stated plans by Trump to cut taxes and increase spending. The expectation is that those policies will fuel inflation, leading to fewer interest rate cuts than investors thought, and ultimately supporting a stronger U.S. dollar.

Prior to the U.S. election, the loonie’s future path was already a concern. But with Trump’s resounding win combined with Republican control of the Senate and possibly the House of Representatives, it’s the president-elect’s plans for tariffs that have TD economists on edge about the Canadian dollar’s prospects.

“The nail biting is over, and now the concern is real,” they said.

Trump has touted an across-the-board 10 per cent tariff on all goods entering the U.S., and up to 100 per cent to 200 per cent on products from China.

TD said a tariff of 10 per cent imposed by a Trump administration on