CAD outlook 2026: Why you should buy the dip on tariff bluster

Published on January 6, 2026

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The playbook for the Canadian dollar in 2026:There are two massive macro catalysts looming, but the risk/reward is skewing higher for the loonie.

1. The Supreme Court Catalyst We are expecting a ruling on the legality of US tariffs, likely this month or next. My base case is that the Court defeats the tariffs. That is the "all-clear" signal for risk assets and a major tailwind for the Canadian dollar. If Trump wins, it looks like a rubber stamp for protectionism—bad for global growth and likely sparking capital flight out of the US. But the smart money is on the Court curbing that power.

2. USMCA: Don't Panic The USTR has already signaled they want to stay in the deal. Even if the US triggers the sunset clause, the agreement doesn't die; it just shifts to annual reviews. The push for a "Fortress North America" is ultimately a boon for Canada as it affirms zero tariffs. Expect intense Trump bluster, but treat those headlines as buying opportunities.

The Domestic Turnaround The internal fundamentals are quietly lining up:

Commodities: Global growth is solid. Oil is finding a bottom, and Canadian energy stocks are already sniffing out long-term value in the oil sands.

Politics: The shift to a "Carney government"—and removing Guilbault—signals Canada is getting easier on resources. Whether it’s Carney or the Conservatives, political certainty is back.

The Consumer: The housing wealth effect didn't bite. Bank stocks ripped in 2025, signaling the market has looked past mortgage renewal fears.

The Bottom Line The loonie gained 5% last year, but it is still underpricing the positive political shifts. With the consumer holding up, the market is already pricing a 65% chance of a Bank of Canada hike late this year. Expect another 5% gain this year

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