Insights 
VT 
Canadian Prime Minister Carney has commented on the ongoing trade discussions with the United States, noting they are currently in an intense phase. He emphasises that any trade agreement reached must be equitable for Canada.
Carney also mentions that a trade deal free from tariffs is unlikely. The focus is now on determining the extent of those tariffs.
Challenge Of Negotiations
In response to comments about the complexity of negotiating with Canada, he acknowledges the challenge but stresses that the effort is for the benefit of the country.
Based on these comments, we see a clear signal of rising uncertainty in Canadian-U.S. trade relations. This uncertainty directly translates to higher expected volatility in Canadian assets, particularly the USD/CAD exchange rate. We should therefore be positioning for a weaker Canadian dollar in the derivatives market.
The Prime Minister’s statements are especially significant given that the United States is, by far, Canada’s largest trading partner. Recent statistics show that total two-way trade in goods and services exceeded $900 billion last year, with over 75% of all Canadian merchandise exports destined for the U.S. Any disruption from tariffs would have an outsized impact on the Canadian economy.
We believe the most direct way to act on this view is through currency options. One should consider buying call options on the USD/CAD pair, which would profit if the Canadian dollar weakens as we anticipate. His acknowledgement that a no-tariff deal is unlikely provides a strong basis for this bearish outlook on the loonie.
Trade Friction Patterns
Historically, periods of trade friction have directly correlated with Canadian dollar weakness. During the tense USMCA negotiations in 2018, the USD/CAD exchange rate climbed from around 1.25 to over 1.35 as negative headlines emerged. We anticipate a similar pattern could play out as these renewed difficulties persist.
Beyond currency, we see risk for the S&P/TSX Composite index, particularly for manufacturers and resource companies. We would suggest buying put options on ETFs that track the Canadian market to hedge against a potential downturn driven by tariff news. The explicit mention that Canada is being “difficult” suggests these talks could become publicly contentious, shaking investor confidence.
The ambiguity about the *level* of future tariffs is also a trading opportunity in itself. This specific uncertainty, highlighted by his remarks, suggests we should prepare for sharp price swings in either direction as news develops. We can structure long volatility plays, such as straddles on key Canadian export stocks, to profit from a large move regardless of the final deal’s specifics.
This perspective is further reinforced by the looming 2026 joint review of the USMCA agreement, which figures like Trump have already signaled could be a point of contention. The current intensity of talks is likely an early indicator of a prolonged period of trade-related volatility. Our strategies should therefore be structured to capitalize on this theme over the next several months.
