Travellers and local businesses alike are bracing for economic turmoil as the Canadian dollar continues to struggle. The loonie hit a 14-month low on Thursday as it closed at 70.9 cents on the U.S. dollar. “When I went to get my American money, it was pretty bad, I got around $375 USD for around $540 Canadian,” said Allyssa Harder, a Canadian traveling to the U.S. “The trip itself is already expensive enough… Everything is just adding up with everything else, and that’s not even including the food prices. This is just for travel,” she continued. It’s not just Canadians travelling to the U.S. who are feeling the pain of a weak Canadian dollar — businesses are also feeling it too. One expert says a lower Canadian dollar would typically cause an increase in exports to the U.S., who would be incentivized to purchase more Canadian goods due to a favourable exchange rate. That, however, isn’t happening because of tariffs. “Under normal times you would benefit, but imagine your industry is facing a higher tariff from the U.S.,” said Aamir Hashmi, who is an associate professor in the University of Calgary’s economics department. “In that case, it makes it difficult, despite the Canadian dollar being weak. You do not get that benefit from the weaker currency because of the tariff policy of the U.S. government.” Business of all sizes are feeling it, including several small businesses at Crossroads Market who said their online sales have suffered greatly. “I’d say a solid 60 to 70 per cent of my customers were from the U.S., and then the tariffs were introduced and that really affected business,” said Wes Emamyar, who owns TheCardMrkt. That number has now dropped significantly to around 10 per cent U.S. customers, he said. Chapter Four Vintage co-owner Derrick Timoshenko, meanwhile, says he’s stopped advertising to U.S. customers. “It’s just too expensive to ship to the U.S. They get hit with tariffs, and you spend more on getting the product there. It’s just kind of like a lose-lose for seller and buyer,” he said. Emamyar explained the occasional U.S. visitor will typically purchase more thanks to the exchange rate, but that’s not nearly enough to make up for all the losses. Sometimes, he says there are situations when U.S. customers are looking to take advantage of the exchange rate online, but that has led to lost sales or customer disappointment when the tariffs come in. “I’ll get returns because someone doesn’t want to pay that tariff,” he said. “Some packages even get stuck in the border because nobody wants to pay a tariff, and that’s just also extra work for me and a little bit troublesome.” For local businesses specializing in more unique products, like Emamyar’s trading cards and video games and Timoshenko’s vintage clothes, a low Canadian dollar and tariffs makes it nearly impossible to source inventory from the U.S. “Owning a business that deals with collectibles, collectible cards and video games, a lot of purchases could be in the thousands and even more, maybe $5,000 or $10,000,” Emamyar said. “Nobody wants to pay a tariff on $5,000 or $10,000. That’s an extra thousand.” “It just means you gotta kind of switch where you’re sourcing your stuff instead of just relying on online stuff for bringing materials in,” Timoshenko added. How did the Canadian dollar get here? Hashmi explains the tariffs and trade uncertainty play a role, but he believes the biggest reason is the “divergent monetary policy in the two countries,” specifically surrounding the federal funds rate. Hashmi said the federal funds rate is currently “quite high,” sitting at the 3.5 to 3.75 per cent rate. Meanwhile in Canada, the Bank of Canada’s policy rate is 2.25 per cent. That means there’s a very large divergence between those rates, he said. “To put it simply, the short-term bond returns in the U.S. are quite high compared to Canada. Money likes to flow where the return is high, so money will be moving from Canada to the U.S.,” Hashmi said. He adds the U.S. dollar is the “safe haven currency of the world,” meaning money is flowing into that currency due to trade and economic uncertainty globally. “Whether it’s because of the war in the Middle East or it is because of the U.S. trade policy, money likes to flow to the United States,” he said. “That is yet another factor that makes the U.S. currency stronger.”
