By Michael O’Neill
Operation Epic Fury is completed. On Tuesday night, Trump took to TruthSocial to say he would suspend bombing Iran for two weeks. His previous promise to end Iranian civilization was quietly shelved.
Secretary of Defense Pete Hegseth declared that American forces secured a “historic and overwhelming victory” against Iran, claiming America achieved every one of its objectives.
On March 1, those objectives were: 1) eliminate the nuclear threat, 2) destroy Iran’s ballistic missile arsenal, 3) degrade its proxy terrorist groups, and 4) cripple its navy. Hegseth has no proof that America eliminated the nuclear threat, and Iranian missiles are still flying today.
On February 27, the Strait of Hormuz was open, and ships could freely pass through. Today, instead of the usual 151 ships transiting the waterway daily, only two have gone through, and they had to pay a toll to Iran for the privilege.
Just before the beginning of April, West Texas Intermediate (WTI) traded at $68.50/barrel. Today, WTI is $94.31/b. Gas prices in the US rose over 40% during Operation Epic Fury, and they are still near their peak levels; diesel prices also remain near their peak. In February, Qatar exported about 77 million tons of LNG/year. Today, after an Iranian missile strike, that number is 63.9 million tons.
If that is winning, what would losing look like?
Loonie Gains Hamstrung by CUSMA
Geopolitical tensions spanked the Loonie, but pending bilateral and trilateral trade talks may give it a serious beatdown. The Canada-United States-Mexico Agreement on trade (CUSMA) is up for its scheduled six-year review. Trump was ecstatic when he signed it on January 29, 2020, calling it “the largest, fairest, most balanced, and modern trade agreement ever achieved.”
Today, he views it as “irrelevant.” He has openly discussed walking away and has threatened to block the opening of the Gordie Howe bridge between Windsor and Detroit to extract more concessions.
Canada’s federal point man on the file, Dominic LeBlanc, has taken a far more measured approach and is sticking to a steady, diplomatic line. He noted that the agreement underpins one of the most tightly integrated economic relationships globally, with supply chains, capital, and labour deeply intertwined.
In a Brookings Institution essay he said that although the US may set the tone, America is equally dependent on the uninterrupted movement of goods, energy, and components across the border. Any disruption risks raising costs for American industry, snarling supply chains, and eroding North America’s competitive edge.
That said, Trump is unlikely to walk away empty-handed. Concessions around Canada’s protected dairy, egg, and poultry sectors remain firmly on the table. His reaction to Prime Minister Carney’s decision to allow Chinese EV imports suggests autos could also become a flashpoint, with potential demands for higher US content requirements in vehicles and parts. Trump clearly sees himself holding the upper hand, and if his rhetoric reflects negotiating intent, Canada could find itself on the defensive.
Bird on a Wire
The Loonie, slathered in BBQ sauce and with one wing clipped, is walking across a tightrope above a field of hungry felines. Bank of Canada policymakers are acutely aware of the slowing economy and the risk of sharply higher energy costs driving inflation above its comfortable 1–3% range. Governing Council used the cover of the Iran war to justify leaving rates unchanged but said they would look through the immediate effect on inflation from the oil price shock.
It wasn’t that long ago when policymakers were looking through the immediate effect of the post-Covid price spike as supply chains reopened. It proved to be a mistake and necessitated 10 rate hikes between March 2022 and July 2023.
The CUSMA renegotiation adds another layer of uncertainty for policymakers. Washington believes China is using Canada (and Mexico) as a backdoor to the American market.
Trump could also use Section 232 “National Security” tariffs to include Canadian-made autos. Both would be a negative for the Loonie. Even worse, if the 16-year CUSMA extension is not confirmed by July 1, 2026, Canada faces an annual review, which would give Trump more room to extract concessions.
USDCAD is likely to trade with a modest downside bias through April, as easing geopolitical tensions and softer oil volatility support the Canadian dollar. However, lingering Fed hawkishness and uneven domestic data should limit declines, keeping price action largely contained within a 1.3800 to 1.4000 range with choppy, headline-driven moves.
For now, the Loonie’s fate is tied to trade and Iran wars and the only thing truly “over” is diplomacy.
