The Canadian dollar weakened after a post on X from Edward Lawrence, FOX Business's White House correspondent, reporting that President Donald Trump had spoken with Canadian Prime Minister Mark Carney about the additional tariffs Washington is preparing to impose on Canada.

According to Lawrence, a White House official confirmed that Trump and Carney spoke last night, and that the conversation focused on the retaliatory tariffs planned by the US administration. The official reportedly said the discussion produced no resolution that would prompt Trump to delay the measures, which are scheduled to take effect at 12:01 a.m. on August 19. Before entering politics, Carney served as Governor of the Bank of Canada from 2008 to 2013 and then as Governor of the Bank of England from 2013 to 2020, giving him first-hand experience with the central bank whose rate expectations are now shifting because of the tariff dispute.

The report added to concerns that the two countries remain unable to reach an agreement ahead of the deadline. Markets had been watching the latest discussions for signs that the tariff measures could be postponed or softened, making the absence of a breakthrough particularly relevant for the Canadian dollar and the Bank of Canada, the country's central bank, which sets Canada's benchmark interest rate.

The tariff threat is especially significant because the measures announced by Washington include 50% tariffs on a broad range of Canadian goods, with the new duties set to take effect on August 19. The Canadian dollar, commonly nicknamed the "loonie" in foreign-exchange markets, is one of the world's most actively traded currencies, and Canada sends the large majority of its exports to the United States, making the bilateral trade relationship central to the country's economy. That relationship is anchored by the United States-Mexico-Canada Agreement (USMCA), the trade pact that replaced NAFTA in 2020, and Canadian shipments to the US are dominated by crude oil, vehicles and auto parts, steel, aluminum and lumber, categories that account for much of the country's export basket. The United States also imports more crude oil from Canada than from any other country.

Tariff concerns also led traders to reduce expectations for Bank of Canada rate hikes, adding another source of pressure on CAD. Interest-rate expectations feed into currency pricing through the yield differential between the two countries, so shifts in the outlook for Canadian rates influence how the loonie trades against the US dollar.

The key question now is whether last-minute negotiations can produce a deal before the deadline. A postponement or agreement could provide relief for the Canadian dollar, while the implementation of the tariffs without a compromise would likely keep trade uncertainty elevated, with markets watching for any further calls or statements from Washington and Ottawa before the 12:01 a.m. deadline.