The Impact of U.S.-Canada Tariff War on the Canadian Mortgage Market: What Homebuyers and Mortgage Holders Need to Know
The recent implementation of tariffs by the United States and Canada’s countermeasures have created economic ripples that may impact Canadian businesses. They also have significant implications for the housing and mortgage markets. Here is how Canadian homebuyers and mortgage holders should prepare for potential changes.
U.S. Tariffs on Canadian Imports
On February 6, 2025, U.S. President Donald Trump announced new tariffs for Canadian exports, including a 25% tariff on many goods and 10% on energy products. These tariffs, which went into effect on March 4, 2025, are part of a broader trade war that could lead to higher costs for Canadian businesses and consumers, potentially impacting interest rates and the wider housing market.Canada’s Response: Countermeasures and Economic Impacts
Canada retaliated with a 25% surtax on U.S. goods worth $30 billion, effective March 5, 2025. The surtax may increase to $155 billion in the event of continued U.S. trade aggression. While these retaliatory measures may initially seem focused on trade, the ripple effects are expected to impact the Canadian economy, which could influence mortgage rates, the availability of financing, and property values.What Does This Mean for Canadian Mortgage Holders?
Higher Interest Rates As tariffs drive up business costs, inflationary pressure could force the Bank of Canada to raise interest rates to curb rising prices. This would impact Canadian mortgage holders, especially those with variable-rate mortgages. Those looking to renew their mortgages or buy a home may find higher monthly payments and increased borrowing costs.Reduced Consumer Confidence
The uncertainty surrounding the tariff war could reduce consumer confidence in the housing market. Potential homebuyers may delay purchasing decisions, affecting demand and leading to slower growth in home prices. Conversely, some investors may view the current market as an opportunity, especially if interest rates remain low.Supply Chain and Construction Costs
The construction sector, which relies heavily on imported goods, could see increased costs due to the tariffs. Materials for new home construction may become more expensive, leading to higher costs for homebuilders. This could result in fewer new homes being built, tightening the housing supply and increasing home prices.Navigating the Mortgage Market During Trade Uncertainty
For Canadian homeowners and prospective buyers, it’s crucial to stay informed about the tariff war’s immediate and long-term economic impacts.- Mortgage Renewals: If you’re approaching a mortgage renewal, you must know that higher interest rates could increase your monthly payments. Consider locking in a fixed-rate mortgage if you’re concerned about rising rates.
- Refinancing: If the cost of living increases due to inflation and tariffs, refinancing could provide an opportunity to consolidate debt or access additional funds. At the same time, interest rates are still relatively low.
- Homebuyers: Those planning to purchase a home may want to act sooner rather than later before interest rates increase or home prices rise due to supply chain disruptions and reduced housing inventory.
