For its part, Canada has been pretty firm that it’s “not looking for” a full-blown free-trade agreement with China. Canadian officials say they have recently made some headway with their Chinese counterparts. Thus far, these discussions have only addressed tariff reduction, not a larger, more comprehensive trade agreement. This news arrives on the heels of destabilizing rhetoric from the Trump Administration and as global markets anxiously await major developments in international trade relations.
Prime Minister Mark Carney has been trying to cool the China tradefire as well. He warns that we must engage with extreme care. He noted that U.S. President Donald Trump’s tariff threats should be interpreted as tactical positioning in light of the impending review of the United States-Mexico-Canada Agreement (USMCA). This year, Canada has committed to participating in the review like never before. An active discussion at all levels of government and society should continue among the three countries.
Carney criticized Ottawa’s leadership in the context of international trade. He charged the tiny but strategically located country with functioning as a “transshipment hub” for Chinese goods destined for the American market. Taken together, these comments paint a picture of Trudeau’s administration as laser-focused on re-evaluating Canada’s trade posture and its effects on local industries.
To their credit, the Canadian government is walking a tightrope through tumultuous trade waters. It’s under increasing attack from all quarters, particularly as the real estate market starts to heat up again. In Canada, the Housing Price Index shot up by 0.6% from October to November. This jump was above forecasts of 0.3% and an increase from last month’s climb of 0.4%. This growing momentum outpaces the national narrative of a weakening real estate sector amidst growing economic insecurity.
The current CAD/USD exchange rate has attracted some attention as well. USD/CAD is currently trading at 1.3637, its lowest level since July of 2025. Analysts predict that uncertainty ahead of upcoming decisions by the Bank of Canada (BoC) and the Federal Reserve (Fed) is behind this drop. Markets are preparing for a potential twin risk event on Wednesday.
The U.S. Dollar Index (DXY) is presently trading close to 96.61, reaching levels at or close to four-month lows. This means a depreciating dollar against all the other currencies. This backdrop only adds more confusion to the trade talks and current negotiations still happening between Canada, the U.S., and Mexico.