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Canadian PM Carney also announced a fund of $5 billion in Canadian dollars ($3.6bn US) to help firms in all sectors hurt by tariffs.

Canada will waive a requirement that 20 percent of all vehicles sold next year be emissions-free, part of an aid package designed to help companies deal with damage done by tariffs from United States President Donald Trump.

Prime Minister Mark Carney made the announcement on Friday.

The 20 percent target was mandated by the Liberal government of then-Prime Minister Justin Trudeau in 2023.

Carney, Trudeau’s successor, said waiving the rule would help the industry deal with punitive US measures that are also targeting the steel and aluminium sectors.

“This will provide immediate financial relief to automakers at a time of increased pressures on economic competitiveness,” Carney told a televised press conference.

Ottawa will also launch an immediate 60-day review to reduce costs linked to the EV sales requirement.

The Canadian Vehicle Manufacturers’ Association welcomed the move, saying the push for mandates imposed unsustainable costs on companies and threatened investment.

Carney said it was too soon to draw any conclusions about whether Ottawa should lift the 100 percent tariffs it imposed on Chinese-made electric vehicles last year. China on Friday prolonged a probe into imports of canola from Canada, one of the world’s leading suppliers.

Carney, who won an April election on the need to diversify the economy away from the US, said Ottawa would set up a new fund worth $5 billion Canadian dollars ($3.6bn US) with flexible terms to help firms in all sectors affected by tariffs.

The US measures are “causing extreme uncertainty that is holding back massive amounts of investment”, he said.

Ottawa will introduce a new policy to ensure the federal government buys from Canadian suppliers and is also introducing a new biofuel production incentive, with more than $370 million Canadian dollars ($267m US) for farmers to address immediate competitiveness challenges.

Carney did not mention specific new aid for the steel and aluminium sectors. When pressed, he said companies could apply for help from existing funds.

The University of California, Santa Cruz is helping launch an initiative to develop a first-of-its-kind test ecosystem for Advanced Air Mobility (AAM) aircraft along the Central Coast, as part of California’s Jobs First initiative to support innovation and create quality jobs. 

By connecting the regional airports of Watsonville, Marina, Salinas, and Hollister, the California Advanced Air Mobility Corridors Initiative (CAAMCI) will support the state’s first FAA-compliant ecosystem for clean-energy-powered drones and advanced aerospace vehicles. 

These efforts are supported by a $7,450,000 grant to the Monterey Bay Economic Partnership (MBEP) on behalf of the Monterey Bay Tech Hub, the latter of which was co-founded by UC Santa Cruz. MBEP, a regional economic development organization focused upon the Tri-County region of Santa Cruz, Monterey and San Benito Counties, served as the Tri-County’s regional convener in the state’s Jobs First Initiative, helping UC Santa Cruz to secure funding for both CAAMCI and the Drones Uplifting California Communities (DUCC) grant aimed at FAA 107-licensed drone piloting training. 

Combining elements of the DUCC and CAAMCI grants, UC Santa Cruz will provide additional support through the campus’s branch of CITRIS and the Banatao Institute, providing training for piloting drones and other unmanned aerial vehicles (UAVs) in the region. This will facilitate the testing, certification, and commercialization of clean-energy aircraft applications in industries such as fire prevention, agriculture, logistics, emergency services, marine science, and defense. 

The initiative aims to bring inclusive economic growth and new opportunities for rural communities in Santa Cruz, Monterey, and San Benito counties. The funds will develop both the advanced infrastructure needed to support safe innovation in air mobility, as well as support the creation of high-quality jobs in electric/hydrogen propulsion, flight systems engineering, ground operations, aviation tech support, and remote piloting.

These efforts will build upon the region’s leadership in the advanced air mobility and drone technology sectors, as the area is home to the nation’s highest concentration of companies in the Advanced Air Mobility (AAM) sector including Joby Aviation, Wisk, Archer, and Parallel Flight. Connecting rural airports will provide the infrastructure needed to further scale the region’s competitiveness and will provide California’s first test ecosystem for these next generation aircraft. 

“Recognition of the extraordinary ecosystem of AAM research and development that has emerged within the Tri-County region is long overdue,” said Larry Samuels, special adviser to Chancellor Cynthia Larive. “The unique coalition of industry, government, and education that has coalesced in the Monterey Bay Tech Hub presents an opportunity to collaborate in creating both economic opportunity and technological advancement in a region that has long been primarily reliant upon agriculture and tourism.”

Ricardo Sanfelice, director of the CITRIS Aviation initiative and a professor of electrical and computer engineering at UC Santa Cruz’s Baskin School of Engineering, emphasized the research and technology development potential of this initiative.

“This project represents a unique opportunity to advance aviation, safely and efficiently, through a joint effort involving industry, government, and academia,” Sanfelice said. “Through the CITRIS Aviation initiative, we are developing an integrated testbed, called the California Airlink, that will enable the deployment of emerging vehicle technology, with capabilities such as beyond visual line of sight, GPS-independent positioning, real-time route planning, and environmental impact analysis. By bringing together drones, eVTOLs, and traditional aircraft into a unified ecosystem, this project will enable us to safely perform tests in realistic conditions. These efforts not only advance the science and technology of air mobility but also ensure California leads the way in creating a reliable and safe aviation ecosystem of the future.”

Additionally, the initiative will expand on the CITRIS’ proven curriculum in UAV training, adapting existing materials and creating new training models to support the development and use of the new corridor.

“The establishment of California’s first FAA-compliant test ecosystem on the Central Coast is a huge opportunity to accelerate the development of both manned and unmanned aviation,” said Michael Matkin, Executive Director of CITRIS and the Banatao Institute at UC Santa Cruz. “At CITRIS UCSC, we’re providing UAV training that ensures this corridor is used to its fullest potential — advancing research, testing, and innovation in a safe and regulated environment that helps our region advance its leadership in pioneering new aviation technology.”

Leaders believe this initiative can impact a wide range of critical tasks in the region, such as delivering medical supplies to rural areas, monitoring wildfire conditions in real time, improving crop production, and inspecting bridges and power lines without risking human life.

• The Canadian Dollar tumbled 0.65% against the US Dollar on Friday.
• Worse-than-expected NFP jobs data sent investors piling into the Greenback safe haven.
• Canadian jobs data did no favors for the Loonie, showing a sharp contraction in the labor market.

The Canadian Dollar (CAD) soured on Friday, skidding into a fifth consecutive losing day against the US Dollar (USD) after employment figures from both Canada and the United States (US) showed both countries are failing to absorb the negative impacts of US President Donald Trump’s trade war with the rest of the world.

Employment data for both Canada and the US soured on Friday as President Trump’s global tariffs weigh on both the US economy and the labor market of the US’s closest trading partner, Canada. US Nonfarm Payrolls )NFP) came in well below expectations, while Canadian hiring figures showed a steep contraction in August, sparking both fresh recession fears and a sharp uptick in central bank rate cut bets on both sides of the 49th parallel.

Daily digest market movers: Souring jobs data pummels Canadian Dollar

• Canada saw a net contraction of 65.5K jobs in August, well below the expected recovery to 7.5K.
• The US also saw NFP jobs gains of just 22K, well below the forecast of 75K.
• The Canadian Dollar reversed early gains on Friday, tumbled two-thirds of one percent top-to-bottom and pushing the Loonie into a fifth straight day of losses against the US Dollar.
• USD/CAD has been pushed back above 1.3840 as risk-off flows bolster the US Dollar across the board.
• Canada is functionally absent from the economic calendar next week, leaving key US inflation data in the driver’s seat.

Canadian Dollar price forecast

The Canadian Dollar’s sharp reversal on Friday, driven by darkening labor market skies, has sewered odds of a Loonie resurgence. USD/CAD is back into the 1.3850 region, and has chalked in a fresh technical bounce from the 50-day Exponential Moving Average (EMA) near 1.3780.

Bullish Greenback flows are pushing USD/CAD back into reach of the 200-day EMA near 1.3870, and current momentum is poised to see a fresh challenge of the last swing high into 1.3925.

USD/CAD daily chart

Welcome to Thoughts on the Market. I’m Andrew Watrous, G10 FX Strategist at Morgan Stanley. Today – a look at how the US dollar behaves under different global growth circumstances. And why – contrary to the views of some observers – we think the dollar still smiles.

It’s Friday, September 5, at 10 AM in New York.

We’ve been talking a good amount on this show about the US dollar – not just as a currency, but as the cornerstone of the global financial system. As the world’s reserve currency, its movements ripple across markets everywhere. The trajectory of the dollar affects everything from your portfolio’s performance to the cost of your next international vacation.

Let’s start with the “dollar smile,” which is a framework Morgan Stanley FX strategists developed back in 2001, to explain how the dollar behaves under different global growth scenarios.

Picture a smile-shaped curve: On the lefthand side, the dollar rises, goes up, when global growth is concerningly weak as nervous investors flock to US assets as a safe haven. On the right side of the smile, when US growth outperforms growth in the rest of the world, capital flows into the US, boosting the dollar. In the middle of the curve – which is  the bottom of the smile – the dollar weakens, goes down, when growth is robust around the world and synchronized globally. In that environment – middle of the smile – investors seek riskier assets which weighs on the dollar – in part because they could borrow in dollars and invest outside the US.

It’s kind of a simple framework, right? But here’s the twist: some investors argue that the left side of the smile might be broken. In other words, they say that the dollar no longer rises if people are really worried about global growth.

They say that if the US itself is the source of the growth shock — whether it’s political uncertainty or trade wars — the dollar shouldn’t benefit. Or that the rise in US interest rates, which makes it more expensive to borrow in the US and invest abroad… or changes in the structure of global asset holdings, might mean that growth scares won’t lead to an inflow to the US and a dollar bid.

We disagree with those challenges to the dollar smile framework.

To quantify the dollar smile, in order to test whether it still works, we started by using Economic Surprise Indices. These indices measure how actual economic data compares to forecasts.

We found that when growth in the US and outside the US are both surprisingly weak – in other words they’re much weaker than forecasted –  the dollar rises on average about 0.8% per month over the past 20 years. Then on the right side of the dollar smile, when US growth really  outperforms expectations, but growth outside the US underperforms expectations, the dollar goes up even more—about 1.1% on average per month. And in the middle of the

dollar smile, during synchronized global growth, the dollar tends to decline on average a little bit, about 0.1% on average per month.

The question is, does that framework, does that pattern still hold up today?

We think it does for a few different reasons. In 2018 and 2019, despite trade tensions and US policy uncertainty playing a big role in driving global growth concerns, the dollar strengthened during periods of poor global growth. In other words, the lefthand side of the dollar smile worked back then, even though the concerns were driven by US factors.

And in June 2025, when geopolitical tensions spiked between Israel and Iran, and growth concerns became elevated –  the dollar surged. Investors fled to safety, and the dollar delivered.

It’s true that in April 2025, the dollar dipped initially after tariff announcements. But then it fell even more after those tariff hikes were paused, despite a rebound in stocks. Growth concerns were mitigated and the dollar went down. So this episode I think wasn’t really a breakdown of the smile. What weighed on the dollar this spring was policy unpredictability in the US, which led investors to reduce their exposure to US assets, rather than concerns about global growth.

So these episodes, I think, show that the dollar can still act as a safe haven, despite changing patterns of global asset ownership, the rise in US interest rates, and even when the US itself is the source of global concerns.

Now, setting aside the framework, it’s important to note that the US dollar dropped about 11% against other currencies in the first half of this year. This was the biggest decline in more than 50 years and it ended a 15-year bull cycle for the US dollar. Moreover, we think the dollar will continue to weaken through 2026 as the Fed cuts interest rates and policy uncertainty remains elevated.

Still, even with all that, we think our framework holds. When markets wobble, remember this: the dollar will probably greet volatility with a smile.

Thanks for listening. If you enjoy the show, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.