Tariffs, Tumult, and the Tale of Two Currencies: Why the CADBRL Cross Just Hit a Three-Month Low
When two currencies dance, it’s rarely a waltz—especially when the music is set by tariff drums and inflationary bass lines. Over the past three months, the CADBRL pair has slumped by a striking 5.3%. At first glance, it’s just another number in the FX ticker parade. But behind the scenes, a cascade of macroeconomic cross-currents, political volleys, and trade intrigue have conspired to send the loonie reeling against the real.
The Great Tariff Tango: When Trade Policy Turns the Tide
This summer, the world watched the Canada-US trade war morph from bluster to reality. A 25% to 35% blanket tariff on Canadian goods—effective August 1, 2025—set off tit-for-tat retaliatory duties, bruising everything from steel to maple syrup. The Bank of Canada’s own words cut through the noise: growth and inflation forecasts are now “less clear” as supply chains twist and margins tighten.
For the Canadian dollar, trade friction is a poison. Not only does it threaten a key export artery, it raises the specter of imported inflation. The loonie has spent these months dodging blows, with headline inflation hovering near 2% but underlying price pressures running hotter. Every fresh tariff headline shaved confidence—and currency value.
Brazil: Inflation’s Double-Edged Sword
Meanwhile, on the other side of the hemisphere, the Brazilian real has found its backbone. Brazil’s economy isn’t without its bruises—2025 inflation expectations have climbed to 5.08%, with the Central Bank of Brazil holding the Selic rate at a punchy 15.00%. Yet in currency markets, tight monetary policy is a magnet, drawing capital flows and burnishing the real’s yield credentials. Even as inflation pushes above target, the hawkish stance has lent the real new strength, especially as investors hunt yield in a world of falling global rates.
It’s not just yield. Brazil’s trade machine has been roaring: 2024 saw a record $4 billion in exports to Canada and a $3.53 billion bilateral trade surplus. The surge in iron ore, soy, and aircraft exports has not only padded Brazil’s coffers, but also added a counterweight to the loonie’s woes.
The Silent Symphony of the US Dollar
Stir in a weakening US dollar, and the plot thickens. The world’s reserve currency has lost its swagger in 2025, battered by Moody’s downgrade of US sovereign debt (Aaa to Aa1), political grandstanding, and a growing chorus demanding diversification. As the dollar sagged, emerging-market currencies—Brazil’s real included—saw their moment in the sun, further tilting the CADBRL equation.
Politics, Populism, and the Power of Perception
FX isn’t just about spreadsheets—it’s theater. In Brazil, President Lula’s political consolidation and trade deal overtures with Canada have soothed nerves, while the Canadian side juggles not only external tariffs but also internal unity campaigns like “Buy Canadian.” Every speech, every policy leak, adds a layer to the currency narrative.
Not All Dips Are Created Equal
The past three months in CADBRL are a lesson in global interdependence. The loonie, battered by trade war and inflation jitters, finds itself outpaced by a Brazilian real buoyed by hawkish rates, robust exports, and the relative calm of a political reset. Add a dash of US dollar weakness and the FX scale tips further.
The -5.3% slide isn’t just a number—it’s a mosaic of policy missteps, inflation surprises, and the relentless hunt for yield. For investors, exporters, and policymakers, the CADBRL story is a masterclass in how the seemingly small levers of trade and rates can set entire economies moving—sometimes in directions nobody quite expected.