By Randy Thanthong-Knight
(Bloomberg) – President Donald Trump’s trade policy could hurt the dollar’s position as a “global security asset,” Bank of Canada Governor Tiff Macklem suggested.
In a speech on Tuesday, Macklem said global investors are considering whether the U.S. dominance in the global financial process will disappear as the world’s largest economy retreats from global trade and continues with massive fiscal deficits.
“It is beneficial to provide safe assets to the world. The United States can borrow money to finance the growing fiscal deficit at a lower tax rate than before,” McClem said in a preparatory note for a speech in Saskatoon, Saskatchewan.
But McClum said: “President Trump’s ‘Liberation Day’ shocked global confidence.
McClum said investors could have expected tariffs to support U.S. currency, but green prices depreciated while gold prices rose. He said that since the beginning of the year, its “role of avoiding behavior has been questioned” due to the dollar’s erosion of about 10% of other major currencies.
“It’s too early to know if this is the beginning of a new era,” the governor said. While green may remain a global reserve currency for the foreseeable future, “for many, its value as a hedge has been weakened during times of stress.”
Trump’s attempts to influence the Fed also “raise questions about the continued independence of U.S. monetary policy.”
The governor warns that trade shifts affecting international capital flows, “unsustainable” U.S. fiscal deficits and ongoing trade imbalances have the potential to increase the risk of financial stability.
“The United States turns sharply to protectionism,” he said. “The huge increase in U.S. tariffs is a dent in global demand, disrupting supply chains, raising prices and permanently lowering the paths for Canada and global economies.”
As a trading country, exports account for about one-third of the country’s revenue, and Canada is under threat. McClum urged government and business leaders to insure economics in ways that monetary policy cannot do.
“The increased trade friction with the United States means our economy will be less efficient, with less cost and revenue,” Macklem said. “There is no better time to deepen investment, increase productivity and expand our markets than now.”
His recommendations include increasing inter-provincial trade and finding new overseas markets, attracting investors by shortening project approval procedures – what the Mark Carney administration has promised to do and reduce regulatory uncertainty. Canada needs to leverage existing trade agreements with 50 countries outside the U.S. McClem says
“Canadians embrace the power of economic patriotism – the elbows are sticking out. “But now, we need to roll up our sleeves and try to be more competitive.” ”
– With the assistance of Erik Hertzberg and Mario Baker Ramirez.
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Last modified: September 23, 2025
