In late November, President-elect Donald Trump took to X to share that, once sworn in on January 20, he would impose a 25% tariff on all imported goods from Mexico and, yes, Canada. Nearly two months later, Trump seems to be sticking to his guns, raising alarm amongst Canadian politicians.
On January 3, Trump added fuel to the fire, posting on X, "The Tariffs, and Tariffs alone, created this vast wealth for our Country [...] Tariffs will pay off our debt and, MAKE AMERICA WEALTHY AGAIN!"
The reaffirmation of his November threat was followed by a post, also on X, from Ontario Premier Doug Ford calling for action from the federal government. "In two weeks, the president-elect will be sworn in as America’s next president and will have every opportunity to make his threats real," said Ford. "Between now and then, the federal government needs to do everything humanly possible to avoid these tariffs."
Since then, Ford and Prime Minister Justin Trudeau have both appeared on various US new outlets, including Fox News and CNN, to make Canada's opposition to the levies clear and to defend the case against them.
Despite the panic — not soothed by accompanying threats of annexation? — this isn't the first time the controversial US politician has proposed substantial tariffs on his neighbours to the north. As RBC economist Rachel Battaglia tells STOREYS, "During the first Trump administration, tariff threats were regularly made to leverage other trade or policy concessions and the most aggressive ones, were never enacted."
Still, if the threat becomes reality, the Canadian economy could take a major hit, impacting the lives of Canadians across the country. And when the economy takes a hit, so does the housing market. Even the threat of tariffs alone, Battaglia says, is not good for investor sentiment.
The Tie Between US Tariffs & Canadian Real Estate
Ultimately, the US raising tariffs on Canadian goods is concerning because it means prices of those goods will increase for Americans and they'll buy less of them. The result is that Canadian businesses and industries make less profit from our largest trading partner, but the impacts have the potential to go beyond that.
"Tariffs imposed by one country on its own imports can have far-reaching effects on the global economy, influencing trade flows, inflation, market sentiment, exchange rates, consumer demand, and more," says Battaglia. "We see these consequences trickling down to the real estate market, reducing demand for housing in Canada."
Economist and Executive in Residence at the Smart Prosperity Institute Mike Moffatt explains the indirect nature of the relationship between US import tariffs and Canadian real estate. "If we’re not able to export things, or have difficulty exporting things, there’s going to be job loss, there’s going to be economic decline, and that’s going to impact the housing market," he tells STOREYS. "You’re going to have fewer people with the ability to buy homes, not unlike what we saw during the financial crisis of ‘08 and 09’."
At the same time, if Canada responds with counter tariffs, it could worsen the already dire "cost to build" crisis by increasing prices on building materials, and by extension, prices for end-users and buyers.
Interest Rates Would Drop, But So Would Housing Demand
If the tariff threat becomes reality and the Canadian economy suffers, the Bank of Canada (BoC) would likely respond by cutting interest rates even further in attempt to keep already unaffordable housing attainable, Moffatt explains.
This might sound peachy if you're in the market to buy a home, but the lower interest rates would be accompanied by job loss and reduced consumer spending, putting a damper on any benefit there may have been for most homebuyers.
Additionally, it is widely predicted that Trump's tariffs would lead to inflation in the US, causing the US Federal Reserve to raise interest rates while the BoC lowers theirs — a divergence that could exacerbate the situation. "We would have more instability if our interest rates go the other way, it certainly wouldn’t help the Canadian dollar as well," says Moffatt. "You would have this environment of economic instability where you’ve got inflation in the US [...] and economic weakness in Canada [...] and markets would just be volatile."
Since June, Canada has been charging ahead on rate cuts compared to the US, which Battaglia says has caused "weakening of the Canadian dollar against the USD." But at the moment, she says RBC predicts "minimal additional CAD depreciation in 2025."
Depreciation In Canadian Dollar Could Spur Foreign Investment
If US and Canadian rate cutting policies do diverge further in the event that the tariffs come to pass, Canadian real estate would see some notable changes.
Good news first: Battaglia says a weaker loonie may boost exports and attract some foreign business investment. It could also mean increased foreign interest in Canadian real estate. Bad news: "A depreciation of the Canadian dollar against the USD would also result in higher import costs for businesses, and could be a burden on debt servicing," according to Battaglia.
But it's more complex than that. "Fluctuations in the exchange rate of the two currencies would not occur in isolation," she says. "Other factors would also impact the housing market, including labour market dynamics, government policies, and interest rates, among others."
According to Moffatt, one of those factors could be changes in immigration policies. "If [the US] is closing their borders even more, that makes Canada more attractive," he says. "Now, Canada’s closed up a bit when it comes to immigration and international students, but that could be a countering force that the next Canadian government might see as an opportunity to attract talent."
Moffatt makes an example of the ongoing debate in the US between Elon Musk and some republicans over tech visas. "If the United States starts to block tech talent, that does make Canada more attractive, and we might see — even if our overall immigration numbers don't go up — if the people coming to Canada are higher income or higher wealth, that may give a boost to Canadian housing."
The Big Picture
It's difficult to predict how the tariffs would play out if enacted on January 20, but we do know there would be a number of factors that shape how Canadians are impacted.
To Moffatt, it's mixed-bag with overall negative consequences. "There are both headwinds and tailwinds right? On the one hand, the economy is going to slow, that's going to be negative for real estate and you would see prices drop. And on the other hand, lower interest rates could help boost housing and so too could getting in more tech talent," says Moffatt. "It’s hard to say which one of those forces is stronger, but my guess would be that overall there would probably still be downwards pressure, though they do counteract each other somewhat."
Battaglia approaches the issue from a bird's-eye view. "Trade wars are generally bad for the economy. They cause inefficiencies that hurt businesses and consumers directly or indirectly," she says. "Retaliatory measures from trading partners can further exaggerate these challenges, creating uncertainty that stifles investment and economic growth."
