Why Is the Canadian Dollar So Weak? Trump’s “Unacceptable” Exchange Rate Claim Explained

On September 6, U.S. President Donald Trump wrote that Canada’s dollar imbalance with the United States was unacceptable and would change, according to an independent archive of Truth Social posts. The post did not name a target exchange rate or a policy to achieve one.

The Bank of Canada’s latest published daily rate for September 4 showed US$1 at about C$1.38.

That makes a Florida vacation more expensive for a Canadian family, increases the Canadian-dollar cost of many U.S. subscriptions and gives some Canadian exporters a price advantage in the United States. But the fact that C$1 does not equal US$1 does not, by itself, reveal an economic problem or an unfair policy.

One British pound being worth more than one U.S. dollar does not make Britain richer than the United States. One Japanese yen being worth much less does not make Japan's economy almost worthless. What matters is how a currency's purchasing power and market value change, why they change, and what those changes do to prices, incomes, investment and trade.

Who determines the exchange rate?

Canada does not choose a fixed price for the Canadian dollar. Banks, businesses, investors, governments and millions of other buyers and sellers trade currencies in a global market. Their combined demand determines the exchange rate.

Trump is right about one narrow effect: a lower Canadian dollar can make Canadian products cheaper for an American buyer, all else being equal. That can help a Canadian exporter compete with a U.S. producer.

Calling the rate itself an unacceptable imbalance goes much further than the evidence. Canada has a floating, market-determined currency. The Bank of Canada says it does not target a particular exchange rate and last intervened to influence the dollar in 1998. More recently, the U.S. Treasury's July 2026 foreign-exchange report recorded no Canadian net purchases of foreign currency during its review period. Canada was not on the Treasury's currency monitoring list.

What does CAD/USD actually mean?

Exchange rates are usually shown in one of two ways:

They describe the same exchange from opposite directions. When USD/CAD rises from 1.38 to 1.45, the Canadian dollar has weakened because it takes more Canadian dollars to buy US$1. When USD/CAD falls to 1.25, the Canadian dollar has strengthened.

The idea that the currencies should naturally trade at one for one is a common trap. Canada could replace every C$1 with ten new currency units tomorrow. Each new unit would then be worth about seven U.S. cents, but Canadians would receive ten of them for every old dollar. Nothing real would have changed. Wages, prices, savings and debts would all be counted in smaller units.

Parity can still matter psychologically. Canadians remember the years around 2007 to 2012 when the loonie reached or exceeded the U.S. dollar. It made U.S. travel and cross-border shopping feel unusually affordable. It was never a permanent neutral setting that the exchange rate must necessarily return to.

Who decides what the Canadian dollar is worth?

No single person presses a button each morning and sets the loonie at 72 U.S. cents.

Canada has used a floating exchange rate since 1970. The Bank of Canada explains that the dollar rises and falls according to demand in foreign-exchange markets. The Bank sets interest rates to keep Canadian inflation near its target, not to keep the loonie at a chosen U.S. value.

Ottawa and the Bank of Canada can influence the exchange rate through policy, but influence is different from control. A tax change, a large spending plan, an interest-rate decision or a new trade conflict may change what investors expect from Canada's economy. The market then reprices the currency, sometimes within seconds.

Direct intervention is possible in exceptional circumstances. Canada could use foreign reserves to buy Canadian dollars if markets were breaking down or extreme movements threatened the economy. The Bank says that has not happened since September 1998.

What makes the Canadian dollar rise or fall?

The exchange rate is the price of one currency in another currency, so Canadian conditions are only half the story. Excellent news for Canada may not lift the loonie if the United States receives even better news at the same time.

1. Canadian and U.S. interest rates

Higher interest rates can make investments denominated in a currency more attractive. If a one-year U.S. government bill is expected to pay more than an equivalent Canadian investment, some investors will prefer U.S. dollars. More demand for U.S. assets means more demand for U.S. currency.

The relationship is not mechanical. Markets react to the path they expect, not only today's central-bank announcement. A rate cut that everyone predicted may barely move the loonie. A surprise comment about future rates can move it immediately.

Bank of Canada research offers a useful rough rule: if Canada's one-year interest rate falls one percentage point below the comparable U.S. rate, that difference may lower the Canadian dollar by about 1%, all else equal. In its analysis of the loonie's 2024 decline, however, the Bank found that interest-rate differences explained only part of the move.

2. Oil and other commodity prices

Canada exports oil, natural gas, metals, lumber, agricultural products and other commodities. Foreign buyers and investors often need Canadian dollars, directly or indirectly, to buy Canadian output or invest in the industries producing it.

Rising resource prices can therefore support the loonie. Falling prices can weaken it. Oil is important, but “oil up, dollar up” is not a law. Canada also imports goods, the United States produces plenty of energy, and currency markets may be reacting to interest rates or global fear at the same time.

3. Economic growth and productivity

Money tends to move toward places where investors expect strong, reliable returns. Faster productivity growth, profitable businesses and attractive projects can draw foreign investment into Canada. Buying a Canadian business, bond, factory or mine usually creates demand for Canadian dollars.

The reverse can happen when Canada's economy is expected to grow more slowly than the U.S. economy. Investors may place more money in American companies and assets, increasing demand for U.S. dollars.

4. Trade

When an American customer buys Canadian wheat, software or machinery, someone in the payment chain may need Canadian dollars. Strong foreign demand for Canadian products can support the currency.

Canada also needs foreign currency to pay for imports. Canadian demand for U.S. products, services and investments creates demand for U.S. dollars. The exchange rate reflects both directions, along with financial flows that are much larger and faster than the box of goods crossing the border today.

5. Fear and uncertainty

The U.S. dollar is widely held and used around the world. During a global scare, investors often move money into highly liquid U.S. assets. That can strengthen the U.S. dollar against many currencies at once, even when the original shock started in the United States.

Trade threats can put special pressure on the loonie. The Bank of Canada found that most of the Canadian dollar's late-2024 decline was associated with a higher foreign-exchange risk premium, not simply the gap between Canadian and U.S. interest rates. Investors wanted more compensation for holding Canadian-dollar assets while tariff policy was uncertain.

6. Inflation and long-term confidence

A country with persistently higher inflation usually sees its currency buy less over time, both at home and abroad. Productivity, government finances, trade policy and confidence in institutions also matter over longer periods.

None of these factors gives a clean forecast for next month. Currency traders know the same public facts, and today's rate already reflects what the market expects. A prediction can be sensible and still lose money because one new inflation report, tariff announcement or central-bank decision changes the calculation.

Does a weak Canadian dollar unfairly hurt the United States?

It can hurt certain Americans. It can also help others.

Imagine a Canadian product that costs C$100 before tariffs and shipping:

The weaker loonie reduces the tariff-paid price from US$90 to US$85 in this simplified example. It partially absorbs the tariff, which is one reason an American government focused on protecting domestic producers may dislike a falling Canadian dollar.

It does not erase the tariff. The product still costs US$85 instead of US$72 before the tariff existed. The Canadian exporter may also be paying more for U.S. machinery, parts, software or financing. Real companies have contracts, profit margins and supply chains that prevent every exchange-rate move from appearing instantly in the final price.

For the United States, a weaker Canadian dollar creates winners and losers:

This is why “bad for the United States” is too broad. A strong U.S. dollar gives American consumers and importers more purchasing power. The same strong dollar makes American exports more expensive abroad and can squeeze U.S. producers competing with imports. The U.S. International Trade Commission describes both sides of that relationship.

The exchange rate also cannot explain the entire Canada-U.S. trade balance. Energy demand, consumer spending, business investment, government deficits, domestic savings, industry specialization and cross-border supply chains all affect what the two countries buy from one another. Changing the loonie would change some prices, but it would not turn those other forces off.

Is Canada manipulating its currency?

There is no public evidence in the latest official U.S. review that Canada is holding down the loonie through currency-market intervention.

Currency manipulation has a more specific meaning than having a currency worth less than the U.S. dollar. It generally involves a government deliberately buying or selling currencies, or using other policies, to suppress its own exchange rate for a trade advantage.

Canada, Mexico and the United States have already agreed on the principle. Chapter 33 of CUSMA commits the three countries to market-determined exchange rates and says they should refrain from competitive devaluation and exchange-rate targeting.

The U.S. Treasury separately reviews the currency practices of major trading partners. Its July 2026 report covered the four quarters ending in December 2025. Canada recorded no net foreign-currency purchases, met only the bilateral-trade-surplus criterion and was absent from the monitoring list. The report concluded that no major U.S. trading partner had engaged in the kind of manipulation prohibited by U.S. law during that period.

That report cannot prove what happens after December 2025. It does show that the latest formal assessment published by Trump's own Treasury Department did not identify Canada as a currency manipulator or even place it among the countries requiring closer monitoring.

How a lower loonie can affect your money

The exchange rate can feel like financial-market trivia until it lands on a credit-card statement.

U.S. travel gets more expensive

At US$0.72 per Canadian dollar, a US$1,000 hotel bill costs about C$1,389 before card fees. If the loonie were worth US$0.80, the same bill would cost C$1,250. That is a C$139 difference with no change in the hotel price.

Airfare sold in Canadian dollars may still rise when airlines face U.S.-dollar costs. Hotels, meals, rental cars, event tickets and highway tolls charged in U.S. dollars expose you more directly. Use Canooq's monthly budget planner to put the converted cost beside your Canadian bills.

U.S.-dollar subscriptions and online purchases cost more

A US$20 subscription is about C$27.60 at USD/CAD 1.38. A credit card charging a 2.5% foreign-transaction fee brings the converted cost to roughly C$28.29. The exchange rate can move while the U.S. price stays exactly the same.

The card's posted conversion rate is not always the mid-market rate shown in a news story. Card networks, banks and transfer services may add a fee or rate markup. For large or recurring payments, compare how many Canadian dollars leave your account, not only the advertised transfer fee. Canooq's international money-transfer comparison shows the rate and estimated amount received together, and its guide to transferring money to Canada explains how fees and timing affect the total.

Imported products can become pricier in Canada

Electronics, vehicles, machinery, food ingredients and business software may be priced in U.S. dollars even when the final shelf label is Canadian. A weaker loonie raises the Canadian cost of those imports.

The increase may arrive slowly. A retailer could have old inventory, a fixed supply contract or room in its profit margin. It may also pass through only part of the currency change. The direction remains the same: imported inputs become harder to absorb when each U.S. dollar costs more Canadian dollars.

Canadian exporters may gain room to compete

A company earning U.S. dollars and paying most of its wages and expenses in Canadian dollars can benefit. Its American sales translate into more Canadian dollars, or it can lower its U.S. price while preserving some of its Canadian-dollar revenue.

That can support sales and employment in export-heavy industries. It is less helpful when the business imports U.S. components or has U.S.-dollar debt. “Exporter” does not automatically mean “winner.”

Your U.S. investments may look better in Canadian dollars

Suppose a U.S. investment stays at US$1,000. At C$1.25 per U.S. dollar, it is worth C$1,250. If the loonie weakens and one U.S. dollar buys C$1.39, the same unchanged investment is worth about C$1,390.

That currency gain can reverse. If the Canadian dollar strengthens, the Canadian-dollar value of a U.S. investment can fall even when its U.S. market price does not move.

This difference matters when comparing currency-hedged and unhedged funds. A currency-hedged fund tries to reduce the effect of CAD/USD movements. An unhedged fund leaves you exposed to them. Neither is automatically better in every period, and exchange-rate forecasts are a weak reason to overhaul a long-term portfolio.

You can test the investment itself with Canooq's compound interest calculator, but treat currency movement as a separate source of gains or losses.

U.S.-dollar income becomes more valuable in Canadian dollars

Someone living in Canada and earning US$50,000 would convert that to roughly C$69,444 at US$0.72 per Canadian dollar. At US$0.80, it would be C$62,500 before tax and conversion costs.

That helps remote workers, creators and businesses paid in U.S. dollars. Canadians sending money to relatives in the United States face the opposite result. They need more Canadian dollars to deliver the same U.S. amount. Canooq's guide to managing money across borders explains where transfer costs can hide.

Inflation and interest rates can be affected, but not one for one

A lower dollar can add inflation pressure because imports cost more. It does not mean every price rises by the same percentage. Businesses may absorb part of the increase, use inventory bought earlier or source a product elsewhere.

The Bank of Canada may consider the exchange rate when judging the inflation outlook, but it does not normally raise rates simply to defend a chosen dollar value. It weighs the broader effect on inflation and the economy. A weak loonie could add pressure for higher rates if imported costs keep feeding into prices, while a trade shock that destroys demand and jobs could pull policy in the other direction.

Could Trump force the Canadian dollar higher?

The U.S. president cannot directly set Canada's floating exchange rate. He can influence it considerably.

Tariffs can weaken expectations for Canadian exports and investment, putting downward pressure on the loonie. U.S. tax, spending and trade policies can change growth and inflation. Comments about the Federal Reserve can move expectations for U.S. interest rates, although the Fed makes its own decisions. A negotiated currency commitment or coordinated market intervention is possible in theory, but it would require policy action, not a declaration that the two dollars should be equal.

There is also a contradiction in using tariffs to demand a higher Canadian dollar. A tariff threat that makes Canada's economy look riskier can weaken the loonie. That lower exchange rate then offsets part of the tariff for American buyers, even as Canadian households pay more for imports.

Canada could try to lift its dollar with higher interest rates or direct intervention, but neither is free. Higher rates would increase borrowing costs and slow demand in Canada. Intervention would use public reserves and might have only a temporary effect in one of the world's largest financial markets. Those tools exist to protect Canada's economy and inflation target, not to make two differently defined currency units match.

Frequently asked questions

Why is the Canadian dollar weaker than the U.S. dollar?

The current difference reflects market demand for the two currencies. Relative interest rates, economic growth, commodity prices, trade flows, investment and the U.S. dollar's global safe-haven role all contribute. The fact that one Canadian dollar buys less than one U.S. dollar does not by itself show that Canada is poorer or manipulating its currency.

Who benefits from a weak Canadian dollar?

Canadian exporters, tourism businesses, people earning U.S. dollars and holders of unhedged U.S. assets may benefit. Canadian travellers, importers, shoppers buying U.S.-priced goods and anyone sending money to the United States generally pay more.

Is a weak Canadian dollar bad for the U.S.?

It disadvantages some U.S. exporters and producers competing against Canadian goods. It also lowers the U.S.-dollar price of Canadian energy, materials, travel and other imports. The net effect varies by industry and cannot be judged from the exchange rate alone.

Is Canada deliberately keeping its dollar low?

Canada uses a market-determined floating exchange rate, and the Bank of Canada says it last intervened in the currency market in 1998. The U.S. Treasury's July 2026 review did not list Canada among the economies whose currency practices required closer monitoring.

Will the Canadian dollar return to parity?

It could, but no one can reliably promise when or whether it will happen. Parity requires C$1 to buy US$1. Canada briefly reached that level during the commodity boom around 2007 to 2012, but parity is not a natural target or the normal state of the two currencies.

Does a lower Canadian dollar make everything more expensive?

No. It most directly affects goods, services and inputs priced in foreign currencies. Rent, local labour and many domestically produced services respond to other forces. Even for imported products, contracts, inventories and business margins can delay or reduce the price change.

Sources

• Trump’s September 6 post, preserved by the independent Trump’s Truth archive
• Bank of Canada: Understanding exchange rates and daily exchange rates
• Bank of Canada: Recent factors affecting the Canada-U.S. exchange rate
• Bank of Canada: Monetary policy, interest rates and the Canadian dollar
• U.S. Department of the Treasury: July 2026 report on the foreign-exchange policies of major trading partners
• Global Affairs Canada: CUSMA Chapter 33 on macroeconomic policies and exchange rates
• U.S. International Trade Commission: Exchange rates and U.S. trade

This article is for general educational purposes and is not financial or investment advice. Exchange rates, fees, tariffs and government policies can change.