Bank of Canada Governor Tiff Macklem said on Tuesday that President Donald Trump’s attempts to influence the Federal Reserve are raising questions about U.S. monetary policy independence and have weakened the U.S. dollar’s safe haven status.
Speaking to the Saskatoon Chamber of Commerce, Macklem noted the dollar has fallen almost 10% since Trump imposed global tariffs in April, calling into question its role as a safe haven.
"For now, the greenback remains dominant, and — without a clear alternative — I suspect it will remain the global reserve currency for the foreseeable future. But for many, its value as a hedge in times of stress has been dented," Macklem said.
The central bank governor emphasized that new global uncertainty, partly triggered by tariffs, highlights Canada’s need to boost productivity and develop new foreign markets.
"The question now is whether U.S. dominance in global financial flows will ebb as the United States pulls back from trade and runs large fiscal deficits. The recent performance of the U.S. dollar may be telling us something," he added.
Macklem warned that the changing trade relationship with the U.S. has major implications for Canada, stressing that the country cannot afford to wait out the situation.
"We should have been making these changes 15 years ago. But the next best time is now," he said.
The governor called for Canada to diversify trade by growing its internal market and finding overseas markets while improving productivity to attract investors. Macklem cautioned that increased trade friction with the U.S. will reduce economic efficiency, increase costs, and shrink incomes in Canada. He noted that neither monetary policy nor fiscal stimulus can offset these impacts, with only positive structural reform capable of countering these effects.
