Trump’s latest tariff threats could spell bad news for Canada’s housing outlook

A pullback in Canada’s overall inflation rate seemed to give cause for optimism to mortgage market watchers yesterday – but it was quickly overshadowed by the announcement of a flurry of new US tariffs on Canada, set to come into effect in August.

Since the beginning of last year, the chaotic trade war launched by US president Donald Trump on global trading partners has continued to dampen consumer sentiment across Canada and harm the national housing market outlook.

Exemptions on a range of Canadian goods compliant with the Canada-US-Mexico Agreement (CUSMA) had slightly blunted the impact of those tariffs on the Canadian economy after earlier fears of enormous job losses and a sharp economic downturn.

But Trump’s decision to impose 50% tariffs on a swathe of Canadian goods threatens to inject a fresh dose of chaos and raise new questions about which sectors of the economy will be affected.

Negotiators face race against the clock after latest tariff announcement

Yesterday, Trump invoked Section 338 of the Tariff Act to introduce levies on Canadian alcohol and dairy products, with Canada's treatment of American automotive exports also cited as a driver of the measures, alongside hundreds of other imports from Canada. Jamieson Greer, the US trade representative, said almost $20 billion worth of Canadian goods will be impacted by the measures, which do not exempt CUSMA-compliant products.

Canadian negotiators have nearly a month to avert the latest wave of tariffs – and their past experience of dealing with the Trump White House shows that it’s often possible to avoid or delay the worst-case scenario, with the president frequently pushing back plans or taking threats off the table.

Still, the trade war has long been viewed as one of the biggest threats to the Canadian housing market, and the latest wave of confusion will likely do little to boost homebuyer confidence.

Last week, the Canadian Real Estate Association (CREA) once again downgraded its forecast for 2026 home sales, now predicting a 1.4% decline in resales compared with last year in large part because of a stormy economy.

But Trump’s decision to impose 50% tariffs on a swathe of Canadian goods threatens to inject a fresh dose of chaos and raise new questions about which sectors of the economy will be affected.

What could a new tariff threat mean for the Bank of Canada?

With the US-Iran conflict putting renewed pressure on oil prices – and potentially Canada’s inflation rate – the threat of a weaker economy because of new US tariffs could also put the Bank of Canada in an even more difficult position as it weighs up its approach to rate hikes in the coming months.

Most economists still expect the central bank to keep rates on hold between now and the end of the year as it takes a wait-and-see approach to the effect of that war. But while financial markets also see a growing chance of a 2027 hike if the inflation outlook worsens, the possibility of a further hit to the Canadian economy from tariffs could also strengthen pressure to lower rates.

For now, all will depend on how negotiations progress between US and Canadian representatives in the weeks ahead and whether officials can strike a deal to nix Trump’s latest flurry of levies.

But while the US-Iran conflict has grabbed headlines in 2026 and pushed the trade war into the background, the new wave announced yesterday shows that Trump hasn’t abandoned his fondness for tariffs as a way of gaining leverage over global trading partners – and that could trigger a further wave of economic uncertainty that spells bad news for Canada’s housing market.

Source CMP
By Fergal McAlinden