Loonie fixing dips below 1.40 on oil and tariff hopes: tariffs explained

The Canadian dollar, often called the loonie, was the strongest major in Friday's European Central Bank reference rates. The USD/CAD fixing for 2026-10-23 fell 0.28% to 1.3995, slipping below 1.40 as oil climbed and a report said the US may lift some tariffs on Canadian goods.

This morning we looked at the euro and weak PMI data. The bigger change since then is in North America. According to investingLive, war worries pushed oil to its highest since May, with WTI crude up $4.01 to $103.47. Separately, investingLive reports, citing the Wall Street Journal, that the US is preparing to lift 50% tariffs on some Canadian agricultural and forestry products, possibly as soon as Friday. Our sister site has a full rundown of the loonie's day. One caution: a fixing is a single daily snapshot. It may not capture news that arrived later in the day, so it does not tell us how much of the move came from the tariff report.

What is a tariff?

A tariff is a tax a government charges on goods brought in from another country. The importer pays it, but the cost often shows up in the final price. A 50% tariff means a good worth $100 at the border costs $150 once the tax is added.

Trade policy is the set of rules a country uses for trade: tariffs, quotas and trade deals. It matters for currencies because foreign buyers need the exporter's currency to pay for its goods. If a tariff makes Canadian lumber too expensive in the US, American buyers may buy less. That can mean less demand for Canadian dollars. When a tariff is removed, the reverse can happen. Traders often react to the news of a change before any goods actually move.

A worked example

USD/CAD tells you how many Canadian dollars one US dollar buys.

1. Previous fixing (2026-10-22): 1.4034. Latest fixing (2026-10-23): 1.3995.
2. Change: 1.3995 − 1.4034 = −0.0039, or 39 pips. A pip is the fourth decimal place in this pair.
3. As a percentage: −0.0039 ÷ 1.4034 × 100 ≈ −0.28%, matching the ECB data.

A falling USD/CAD means the loonie gained. The ECB data shows a 1.17% drop over five fixings, from 2026-10-16.

Now an illustration of a tariff, using today's fixing. Suppose a Canadian exporter sells a product for C$100.

• Price in US dollars: 100 ÷ 1.3995 ≈ US$71.45.
• With a 50% tariff: 71.45 × 1.5 ≈ US$107.18.
• Without the tariff: US$71.45.

The tariff adds about US$35.73 to the cost. Removing it makes the product far cheaper for US buyers. That is why a report on tariff relief can matter to currency traders.

Other data also came out. Canada's August retail sales rose 1.2%, just below the 1.3% expected, according to investingLive. On Thursday, Investing.com linked the loonie's strength to oil prices and bets on a Bank of Canada rate hike.

Why it matters for new traders

• Several drivers at once. Oil, tariffs, data and rate bets all hit the loonie on the same day. Avoid giving one headline all the credit.
• Reports are not decisions. The tariff news is a report about what the US may do. Plans can change, and markets can reverse if they do.
• Timing matters. A daily fixing can miss news released after it is set. Check when a headline came out before linking it to a price.
• Politics drives trade policy. investingLive notes the motivation appears political, tied to an upcoming US election.

You can follow the pair on a USD/CAD chart.

Key terms

• Tariff: a tax on imported goods.
• Trade policy: a government's rules for trade with other countries.
• Loonie: a nickname for the Canadian dollar.
• Reference rate (fixing): one official exchange rate per business day, not a live quote.
• Pip: the smallest standard price step, here the fourth decimal place.