Donald Trump's return to the presidency signals potential significant economic challenges for Canada, with implications spanning trade, housing, and broader economic stability. The new administration's proposed policies could dramatically reshape the Canada-US economic relationship.
Trade Tensions and Tariff Threats
Trump has explicitly threatened to impose a 25% tariff on Canadian imports as early as February 1, 2025. These tariffs are not just economic maneuvers but are tied to broader geopolitical concerns, including migration and drug trafficking issues. Prime Minister Justin Trudeau has made it clear that Canada will not simply acquiesce to these threats, warning that the country is prepared to "inflict economic pain" in response.
The potential economic impact of these tariffs could be substantial. Economists predict that a 25% tariff on Canadian imports could:
Sharply reduce Canada's GDP
Drive up unemployment
Increase inflation
Force the Bank of Canada to raise interest rates
Sectoral Vulnerabilities
Certain Canadian industries are particularly exposed to potential trade disruptions:
| Sector | Potential Impact |
| Energy | High vulnerability to tariffs |
| Automotive | Significant risk of economic disruption |
| Manufacturing | Potential for substantial job losses |
| Agriculture | Likely to face significant trade barriers |
Housing Market Implications
Mortgage and Borrowing Costs
Trump's fiscal policies could indirectly impact Canadian bond yields, potentially pushing fixed mortgage rates upward. Mortgage strategist Robert McLister warns that this would make borrowing more expensive, potentially driving increased demand toward rentals.
Economic Uncertainty
The uncertainty surrounding trade relations could dampen business confidence, potentially slowing commercial real estate expansion and reducing housing demand in metropolitan areas. The ripple effects could include:
Reduced job market stability
Slower economic growth
Potential cooling of housing prices in major urban centers
Immigration and Population Dynamics
Interestingly, Trump's restrictive immigration policies might create an unexpected opportunity for Canada. Experts predict a potential immigration wave of skilled workers seeking to relocate north of the border. This could:
Drive up housing demand in major urban centers
Put upward pressure on prices in Ontario, Alberta, and British Columbia
Potentially offset some of the economic challenges posed by trade tensions
Potential Economic Mitigations
Despite these challenges, Canada has some strategic advantages:
Natural Resources: Trudeau emphasizes that the US needs Canadian resources like oil, lumber, steel, and critical minerals.
Trade Relationship: The two countries exchange approximately $909 billion in trade annually.
Negotiation Leverage: Canada has demonstrated its ability to navigate complex trade negotiations.
Long-term Economic Outlook
Oxford Economics suggests the economic impact will be mixed. While there might be an initial boost to exports from US fiscal stimulus, this could be offset by:
Tariff-related drag
Higher inflation
Tighter monetary policy
The organization predicts a gradual implementation of tariffs, potentially phasing in 10% tariffs on about one-tenth of US imports from Canada between 2026-2027.
Conclusion
The incoming Trump administration presents a complex landscape for Canada's economy and housing market. While significant challenges exist, there are also potential opportunities for adaptive businesses and investors.
We at Greenlight Capital Canada undoubtedly are closely monitoring these developments, providing strategic insights to navigate this uncertain economic terrain.
The next few years will be critical in determining how Canada can maintain economic resilience in the face of potential trade disruptions and policy changes.
