USD/CAD under pressure after US Supreme Court strikes down Trump’s tariffs

The Canadian Dollar (CAD) holds firm against the US Dollar (USD) on Friday as the Greenback trims earlier intraday gains after the US Supreme Court struck down President Donald Trump’s sweeping global tariffs. At the time of writing, USD/CAD is trading around 1.3690, though it remains on track for modest weekly gains.

In a 6-3 ruling, the Supreme Court found that President Donald Trump overstepped his constitutional authority by using emergency powers under the International Emergency Economic Powers Act (IEEPA) to impose broad import duties.

However, the Court stopped short of clarifying the issue of tariff refunds. According to estimates from the Penn Wharton Budget Model, the US government could face more than $175 billion in refund claims if the ruling leads to repayments.

Uncertainty still lingers, as President Donald Trump had previously indicated that he could explore other legal tools to keep tariffs in place if the Court ruled against him.

Traders also digested fresh economic data from both the US and Canada.

In Canada, Retail Sales declined 0.4% MoM in December, slightly better than the expected 0.5% drop but reversing November’s 1.2% increase. Retail Sales excluding autos rose 0.1%, beating forecasts for a 0.3% contraction, though slowing sharply from the prior 1.6% gain.

In the US, advance estimates showed the economy expanded at an annualized pace of 1.4% in the fourth quarter of 2025, slowing sharply from 4.4% in the previous quarter and falling short of the 3% consensus forecast.

Inflation data painted a firmer picture. Core PCE — the Federal Reserve’s (Fed) preferred inflation gauge — rose 0.4% MoM in December, accelerating from 0.2% and topping expectations of 0.3%. On an annual basis, Core PCE climbed to 3.0% from 2.8%, also above the 2.9% forecast.

Headline PCE inflation also firmed in December. The PCE Price Index rose 0.4% MoM, accelerating from 0.2% in November and exceeding the 0.3% consensus. The annual rate ticked higher to 2.9% from 2.8%.

The softer growth data contrasts with the firm inflation readings, complicating the Fed's monetary policy outlook. Sticky price pressure reinforces the view that the Fed may need to keep interest rates higher for longer, even as economic momentum cools. Still, markets continue to price in two rate cuts later this year.

Other data releases showed signs of cooling activity in the US economy. Preliminary S&P Global PMI figures indicated that the Composite PMI slipped to 52.3 in February from 53 previously. The Manufacturing PMI fell to 51.2 from 52.4, while the Services PMI edged down to 52.3 from 52.7.

At the same time, the University of Michigan’s Consumer Sentiment Index declined to 56.6 in February from 57.3, with the Expectations Index steady at 56.6. Notably, inflation expectations ticked lower, with the 1-year outlook easing to 3.4% from 3.5% and the 5-year measure slipping to 3.3% from 3.4%.