The first quarter of 2025 has been one marked by no small measure of uncertainty. Threats of tariffs coming from our nation’s largest trading partner, and troubled waters on a federal level, are fueling doubts about how both nations will resolve the dispute. All the while citizens, on both sides of the border, brace themselves for the fallout.
We spoke with Dr. Joel Bruneau, Department Head of Economics at the University of Saskatchewan, to help make sense of it all. He began by discussing the implications of the Canadian dollar’s current value when compared with the US greenback, and if there is an ‘optimal’ range at which our dollar trades at.
“I am not so sure there is a ‘best value’, if you’re an exporter, having a lower Canadian dollar is advantageous because if you’re selling, especially at American prices in say, oil or gas, you get to sell it at the American price, but you’re paying workers in Canadian dollars, so you get higher profits and potentially more sales because you can lower your price and still make a good profit.”
“But if you have to import, particularly if the import prices are quoted in American dollars, then you can be worse off because you’re now buying, say, automobiles or farm equipment based on US prices, but you’re paying Canadian dollars for it.”
He explained that, in general, a weaker lower Canadian dollar will cause a trend towards lower imports, while simultaneously growing the supply of exports.
What does this mean for Saskatchewan?
“The small changes that we’ve seen here (in recent months) probably don’t have a big impact, especially if you’ve already set your contracts... but a perpetually low Canadian dollar, will benefit Saskatchewan, who exports a lot into the world market, and a lot of those things are priced in American dollars.”
Saskatchewan also imports a considerable amount every year, however Bruneau noted that the majority of our imports come from other provinces, which means that prices aren’t likely to change all that much.
“This is called a ‘Terms of Trade Improvement’, the price of things that we export are actually increasing in value because the Canadian dollar is falling, but the things we purchase aren’t necessarily more expensive, probably because we are buying a lot of stuff from within Canada.”
Bruneau explained that a low Canadian dollar may not necessarily be a bad thing for the province, given how it trades with the US and other parts of Canada, but there are far better methods for increasing wealth.
“It’s not the preferred way to become wealthier. The preferred way to become wealthier is being more productive.
“We do know that the lower Canadian dollar is going to hurt some individuals and some businesses. Ideally, what you want is much higher productivity in a high Canadian dollar. That allows us to purchase stuff outside the country cheaper. That’s good for us, the reason we export is so we can import.”
He explained that while some portions of the import sector are harmed considerably by the current strength of the dollar, using the acquisition of farm equipment from the United States as an example of an industry that would be hit hardest by a poor exchange rate.
What are the long-term implications?
Although holding steady around the $0.69 US mark, the unpredictability in the North American political climate has the potential to send the nation’s currency down further. However, Bruneau is not quick to make assumptions about its trajectory.
“We haven’t really seen a really big change in the Canadian dollar over the last six months, we’ll have to see what goes forward in the next four to five months.”
He noted that while it is too early to say where the dollar will land – especially with the threat of tariffs still looming over Canada – he did note that any products imported from our southern neighbour would see price increases, at the very least, with the potential for a recession if the dollar takes a downturn as a result.
A self-fulfilling prophecy
While the implications of a potential tariff war with the United States are a continued topic of discussion, the uncertainty that is fueled by the conversation could also be informing decisions being made by investors and consumers north and south of the border.
“Typically, in the United States, when they throw on tariffs, their dollar rises. So, if you think they are going to throw on tariffs, you might want to buy American currency now and catch it on the way up.
“It sort of becomes a self-fulfilling prophecy to some extent. If you think the American dollar is going to rise or the Canadian dollar is going to fall, you get out now. That causes it to fall.”
Ultimately, the answer on whether or not the tariffs will hit Canadians is still up in arms, but that won’t stop investors, consumers and businesses from trying to get ahead of curve and avoid being burnt by the consequences.
“We're seeing just that uncertainty and people trying to guess the outcomes of what's going to happen over the next month.
“But a tariff war with the United States is not good news for Canada. It's not particularly good news for the United States, but it's much more dramatic for Canada because we rely much more on the United States than they do on us.”
Although the potential tariffs will resonate far more for Canadians, one should not discount how consumers on the American side will react.
“The real question seems to be ‘How are the Americans going to respond to these tariffs and how much pressure will be on the administration to find carve-outs?’
"If there are carve-outs say, for oil and potash, but they put it on all the other stuff that comes from Canada, will the federal government then say ‘Okay, we'll put an export tariff on potash and oil so that all of our sectors across Canada are equally traded.'
"One could imagine that if the United States does a carve out, we might undo that carve out. We're speculating, and that speculation just causes uncertainty.”
We may need to just weather this storm
Bruneau likens the current situation to that of a winter storm, saying that you know it is coming, you just don’t quite know if it is going to hit you or not and how long it may last. But much like a winter storm, you can take some steps to prepare for whatever is going to happen.
“If you're particularly concerned, I think you need to talk to your financial advisor, you need to talk to other people about these things. My personal strategy is I'm just going to not watch TV for a while, and count on the fact that in three or four years time it'll have washed out.”
“I'm taking a much longer view of my portfolio and my retirement opportunities because I'm not there yet... other people might not be in that position, and they should go talk to a professional.”
A measured and deliberate response is important, indicated Bruneau, who explained that situations akin to the one currently faced have played out in the past, and panicked reactions from those impacted can be detrimental.
“We've seen this before, where there's a big sell-off on the stock market and people get scared and then they sell out and in like a week later, the stock market has rebounded.
If you just sat there and did nothing, you would have been fine. It's that sort of panic response that that can be really problematic.”
“The question is: ‘When is that recession going to hit?’ If you think that it's going to hit really soon, then moving out of stocks might be a good idea. I don't know. I'm not a financial advisor. If you think that, no, we're not going to recession and that we'll have a slow down, I wouldn’t get out of (the stock market).”
As the situation develops and continues to be rife with speculation, Bruneau indicated that there is something to take away from the discussions happening in Ottawa and the provinces.
“Think about the talk that's coming out of Ottawa, and also out of the Premier's office, which is, ‘We're not going to respond to rumor. We're going to respond to action, and when we see the action, then we'll figure out what our response is.’
That is the sort of the approach I'm going to take, which is and again as I'm very cognizant that in four years' time it’ll probably work itself out, maybe earlier than that.”