Don't bet on a housing and mortgage slump despite the US president's latest trade war escalation
US president Donald Trump issued a fresh flurry of trade threats against Canada last week, vowing a new wave of tariffs by August 1 in a letter to prime minister Mark Carney.
But while Trump roiled financial markets earlier in the year by announcing huge tariffs against Canada and other key global trading partners, last week’s move caused a milder reaction – partly because plenty of his threatened tariffs to date have failed to materialize.
Trump said on Thursday he would soon impose 35% levies on Canadian goods crossing the border, although an official from his administration later told CBC News that those new tariffs would not apply to goods that comply with the Canada-United States-Mexico (CUSMA) free trade agreement.
That’s an important caveat, Alberta Central chief economist Charles St-Arnaud (pictured top) told Canadian Mortgage Professional. “When you look at the configuration of the tariffs on Canada and the way it’s done, it’s still not as bad as what we feared back in February when he first announced 25% tariffs on everything and 10% on energy,” he said.
“Now, you have 35% on what is not CUSMA compliant, but most of the trade between Canada and the US is CUSMA compliant. The only thing that you need is as a business, to take the time and money and do the whole procedure to get your CUSMA certification. Once you’ve done that, you’re not [seeing] any tariffs. So in that sense, that’s less bad.”
In a major escalation of US-Canada trade tensions, Donald Trump announced a sweeping 35% tariff on Canadian imports, effective August 1, raising alarms over the potential impact on Canada's already fragile economy and its housing market.https://t.co/HMXQQf7LHF
— Canadian Mortgage Professional Magazine (@CMPmagazine) July 14, 2025
Canadian economy shows encouraging resilience amid trade chaos
Five-year Government of Canada bond yields hopped in the wake of Trump’s latest tariff announcement, although they avoided the spike seen in January when he unveiled his first trade salvo against Canada.
That’s not to say it’ll be plain sailing for the Canadian economy if the new tariffs come into effect: the steel, aluminum, and copper manufacturing sectors could see sharp pain, while automaking has already taken a hit from Trump’s trade war.
Still, St-Arnaud said the outlook appears less severe than in the opening months of the year, when the threat of blanket tariffs on Canadian imports raised alarm about a potential economic catastrophe.
New labour market data released last week showed that employers unexpectedly added a net 83,100 jobs in June while the unemployment rate ticked lower, suggesting that the economy has remained resilient in the face of Trump’s tariffs.
There’s reason for cautious optimism on the trade outlook, according to St-Arnaud, with both business and consumer optimism appearing to be improving slowly.
“It kind of gives me the feeling that at least the economy is no longer deteriorating,” he said. “We might be stabilizing at a low level of economic activity. I don’t expect we’ll have a strong rebound, but at least we’re not deteriorating.”
What’s next for Canada’s housing and mortgage markets?
Mounting unease about a weakening economy and a shaky labour market weighed against the housing and mortgage outlooks in the opening half of the year, with homebuying activity remaining sluggish.
For now, though, there are few signs that Trump’s latest round of tariff threats could torpedo Canada’s housing market – and St-Arnaud even said a mild uptick could be on the way between now and the end of the year.
“We could maybe see some catching up in activity. The first half of 2025 has been weak in terms of activity, and you kind of wonder – are there some potential buyers that were on the sideline?” he said.
“They decided that there’s too much uncertainty, and now that uncertainty is being lifted they’ll be coming back to the market in the second half of the year – so thinking about the housing market and consumers in general, we might see a small, modest rebound.”
But even though the economy has so far averted a steep slide – and the current tariff landscape is less rocky than earlier in 2025 – St-Arnaud cautioned against anticipating a strong housing market surge between now and the end of the year.
“Don’t expect a big boom,” he said. “You’re not going to see consumer confidence sharply higher. It will improve, but it will remain at a relatively low level [although] not necessarily consistent with a recession.
“It looks like more of a marginal recovery. We’ll see some growth but not a strong growth outlook for the rest of the year.”
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