USD/CAD posts modest gains above 1.3800 amid Trump’s tariff threats

The USD/CAD pair posts modest gains around 1.3835 during the early Asian session on Tuesday. However, the threat of a fresh US trade clash with Europe could weigh on the Greenback against the Canadian Dollar (CAD). Traders await the speech by US President Donald Trump at the World Economic Forum in Davos, Switzerland, on Wednesday for fresh impetus. 

US President Donald Trump threatened to impose tariffs on eight European nations that oppose his plans to take control of Greenland. It would rise to 25% if an agreement is not reached by June 1. European Union leaders will convene in Brussels for an emergency summit on Thursday. White House threats to Europe over the future of Greenland might trigger the so-called “Sell-America” trade, which could drag the US Dollar (USD) lower broadly. 

"We're seeing the U.S. dollar take it on the chin and obviously the Canadian dollar is benefiting as a result of that movement," said Rahim Madhavji, president at KnightsbridgeFX.com. "It looks like the market is rattled by the actions of the U.S. administration."

Canada’s annual Consumer Price Index (CPI) inflation rose to 2.4% in December from 2.2% in November, according to Statistics Canada on Monday. On a monthly basis, the CPI fell 0.2% in December, compared to an increase of 0.1% in the previous reading. Meanwhile, the core inflation measures, which the Bank of Canada (BoC) closely monitors, continued to moderate in December.  

Analysts largely expect the BoC to hold the rate steady for the upcoming January 28 decision and potentially through most of 2026 due to a mixed economic picture.