A new trade war began in February 2025 by the US against Mexico and Canada after U.S President Donald Trump imposed new tariffs on goods that are exported from these countries. AUD and CAD, is facing challenges. CAD is attached to important commodity markets such as natural gas, crude oil, and lumber. Australia, on the other hand, is a big exporter of agricultural and mining commodities. Trump’s trade tariffs policy imposes 25% tariffs on different goods from Canada and 10% on AUD. The AUD CAD forecast shows a crisis situation.
AUD and CAD Commodity Currencies
Being the world’s largest exporter of crude oil, price fluctuations greatly affect its trade. Increased tariff means less revenue, which will create financial difficulty as most investors will lose confidence to trade. If there is an increase in oil prices, then CAD strengthens. So, higher revenue is generated. The status of CAD also depends on the US economy. As more than 75% of Canadian commodities go to the US, if the demand for goods decreases, then CAD will face a challenge.
Australia exports its coal and iron ore mainly to China. So, Chinese infrastructure investment demand affects the position of AUD. Decisions about interest rates by the Reserve Bank of Australia (RBA) also play a critical role in the status of the AUD.
Current Status of AUD and CAD
Slowdown of global economy is prevalent today. Volatile commodity prices and high debt are mainly responsible for it. Last year, the conditions of AUD and CAD were not favorable. The AUD/USD went down by 7.25% while the CAD/USD fell by 7.48%. The Reserve Bank of Australia (RBA) held its cash rate constant at 4.35% for a long time, and that’s why the AUD became weak. Australia and China have strong economic ties, so the stumbling Chinese economy also had a negative impact on AUD.
The AUD may benefit from a weak USD, but the gain is temporary. In 2026, if the USD starts recovering, then things will change. If the currency crisis situation prevails, the AUD CAD forecast is that AUD is expected to fall again towards the end of 2026. AUD’s performance is also greatly dependent on China’s economic condition. China has issues in banking and properties, which may hold back metal demands thus dragging on prices of gas, oil, and iron ore. Also, political uncertainty exists in the US, and the US-China trade tensions are also unresolved.
Approaches To Survive In The Global Slowdown
Canada and the US are major customers of each other. About 75% exports from Canada are going to the US. On the other hand, about 17.3% of American goods go to Canada. These two countries rely on one another for food, energy, and military security. Canada needs to play a bigger role in global trade policies by contributing to rebalance the global currencies.
The new tariff rate imposed by the U.S. on different countries can complicate Canada’s diversification of exports. The status of CAD in this difficult period also depends on how much Canada’s firms can absorb tariff costs. Many firms think that they can absorb a 10% tariff, but it will slow down economic growth. They should consider the AUD CAD forecast before making any important trade-related decisions. Industries like the automotive manufacturing that rely on cross-border trade will be greatly affected.
Canada should highlight how important role it plays in the U.S economic and energy security and offer negotiating terms. At the same time, geographic diversification of Canada’s resource exports is necessary. Canada needs to invest in infrastructure to attract capital and also stabilize the regulatory environment.
There will be a current account deficit. The countries will be getting capital from foreign lenders and they will be importing more than exporting. If capital inflows from foreign investors continue for a long time, then dollars will be taken out of the emerging market, thus lowering the exchange rates. This will cause depletion of reserves and an increase in interest rates, eventually causing recessions.
Hyperinflation, increased unemployment, high debt burden, and reduced wages are some of the terrible consequences of a commodity currency crisis. Due to economic uncertainties in major players like the U.S and Europe, the demand for exported goods has shifted from Australia, Canada, and other commodity-dependent nations.
The geopolitical conflicts, like the Russia-Ukraine war, have created disruption in the global supply chains of important commodities. While causing price surges, this volatile environment has negatively affected currency stability. Thus, the policymakers of these countries must do the necessary adjustments and take action quickly.
