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The Canadian dollar fell against its U.S. counterpart on Tuesday after President Donald Trump said the U.S. and Mexico could move forward without Canada in a new NAFTA deal.
In a tweet Saturday, Trump said there is “no political necessity to keep Canada in the new NAFTA deal,” and that Congress “should not interfere” with the negotiations.
The U.S. dollar rose to 1.3192 against the loonie on Tuesday, its highest level since July 20, when it hit 1.3289. The greenback later eased to trade at 1.3181.
Tuesday’s moves and Trump’s tweet come after the U.S. and Canada adjourned trade negotiations last week. The two countries are scheduled to resume talks on Wednesday.
The U.S. and Mexico struck a trade deal last week that did not include Canada. Officials from the U.S., Canada and Mexico had expressed optimism last week about Canada joining the new deal before the talks broke down.
“There’s a great deal of risk premium built into dollar/CAD right now,” said Peter Ng, senior FX trader at Silicon Valley Bank. “The tweet was very negative in terms of where the talks are at.”
“A no-deal would be very damaging to the Canadian economy,” Ng said. “Perhaps this is some sort of brinkmanship by Trump.”
Trump has repeatedly railed against NAFTA, calling it the worst trade deal ever. In another Saturday tweet, he said the deal — which includes the U.S., Canada and Mexico — should never have been signed.
Canada is one of the United States’ biggest trade partners. Last year, the two countries exchanged more than $670 billion in goods and services, according to data from the U.S. Trade Representative’s office.