How is Canadian trade affected if the exchange rates change?
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If the exchange rate increases (appreciates), the price of exports will increase and therefore the demand for exports will decrease. Also, the price of imports will decrease, causing a higher demand for them.
If the exchange rate decreases (depreciates), the opposite will happen. So, price of exports will decrease, and demand will increase. Price of imports will increase, and demand will decrease.
This is the same for all countries, but it doesn’t always work in practice. It depends on how much competition there is, the quality of products, the economic situations of countries, how essential the product is to life.
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