Here is the rewritten text without any changes in content:
Jack Mintz: A Sinking Dollar Is Trudeau’s Latest Legacy
The Canadian dollar has been on a downward trend, and it wouldn’t be surprising if it becomes a factor in the next federal election. The most famous instance of the dollar playing a role in an election was during the Diefenbaker government, when the dollar sank from parity to 92.5 U.S. cents after a disagreement over monetary policy with Bank of Canada governor James Coyne.
The loonie has fluctuated over the years, reaching its all-time low of 61.8 U.S. cents in January 2002 due to weak commodity prices and global uncertainty following the September 2001 attack on the U.S. After a resource boom and continued fiscal responsibility brought our dollar back up to parity during the Harper years, it fell to below 80 U.S. cents when commodity prices collapsed after October 2014.
Several factors contribute to the Canadian dollar’s weakness. Commodity prices play a significant role, as resources account for over half of our export earnings. Political risk is also a factor, and if real interest rates stay higher in the U.S., investors will prefer American bonds over Canadian ones.
Increased private and public indebtedness to the rest of the world puts pressure on our dollar as investors become more concerned about our ability to service that debt. Expect the Canadian dollar to weaken further in 2025 due to falling oil prices, interest rates staying higher in the U.S., and our growing indebtedness.
The Trump tariffs could also cause the loonie to fall further this year, softening the impact of tariffs on Canadian exporters but hurting importers. This would encourage Canadian companies to shift production and capital to the U.S. rather than try to keep exporting from Canada.
On top of all their other economic challenges, Canadians don’t want a declining currency too. If the loonie falls further this year, that will be another negative in Justin Trudeau’s legacy.
