Economist says Trump will face pressure to wind down the tariff dispute, potentially signalling good news ahead for Canada’s housing outlook
A Democratic Party wave swept the US on Tuesday, ending Republican control of both houses of Congress and potentially curbing Donald Trump’s ability to govern with the same force he’s used in the first half of his second presidency.
For Canada, the biggest immediate question is whether that political earthquake could put pressure on the Trump administration to revisit its controversial global tariff policy, one that’s weighed against the Canadian economy and damaged Canada’s housing market outlook.
Trump can still wield executive orders, a hallmark of his current presidency and one of the main ways he’s imposed and adjusted tariffs on key trading partners including Canada.
But he could face pressure from both outside and within his own party to wind back the levies on Canada – a development that would likely mark a major boost for the Canadian housing market.
On Thursday, Oxford Economics’ lead US economist Bernard Yaros highlighted how lawmakers could make ending the trade war with Canada a focus during the next Congress.
“There is widespread enough dissatisfaction in Congress with the US tariffs on Canada, given how important cross-border trade is between Canada and a lot of our northern border states,” he said.
“A lot of the fallout has been very visible for voters, especially on the ground in Maine where you’ve seen a big hit to the tourism industry from [fewer] Canadian arrivals ever since the breakout of the trade war between the US and Canada.”
How the trade war has damaged Canada’s housing market
High interest rates and affordability concerns have kept homebuyers on the sidelines across Canada in 2025 and 2026, but the outbreak of trade tensions with the US when Trump took office in January last year has also been a big factor in the market’s sluggishness.
Economists including BMO Capital Markets director and senior economist Sal Guatieri have flagged how the prolonged tariff dispute is damaging the housing market outlook and consumer confidence.
In September, Guatieri told CMP that the imposition of further tariffs could increase concerns about job security and push Canadians away from making a big investment in housing. “Until we see some clarity and de-escalation of trade tensions, I think the housing market could remain pretty fragile for a while,” he said.
The fall housing market has remained subdued partly because of deteriorating trade relations, according to Royal LePage.
The real estate giant’s president and chief executive officer Phil Soper said last month that while buyers have more negotiating power in a quieter market, other forces are denting their confidence.
“Unfortunately, it’s the economic uncertainty – both related to the trade war and the Iran war – that will likely keep a lot of buyers, especially first-time buyers, on the sidelines,” he said.
Talk of a potential deal intensifies
As the midterms neared, Trump suggested a deal with Canada could be close, perhaps indicting his awareness of how unpopular the tariff wave had been.
Prime minister Mark Carney, meanwhile, hinted at a return to the negotiating table – and Canada Mortgage and Housing Corporation (CMHC) deputy chief economist Aled ab Iorwerth noted a trade deal could potentially brighten the outlook for home building and mortgage arrears.
Delinquencies have crept steadily higher across most markets, but tariff-impacted areas including Southern Ontario have been most heavily impacted.
South of the border, the Democrats will now command clear majorities in both the Senate and House – a fact that Yaros sees signalling a potential de-escalation ahead in trade tensions.
“The Canadian tariffs in particular are very unpopular,” he said. “We’ve seen already legislation attempting to repeal them. And I think with Democratic majorities, you could see renewed efforts.
“At the very least, that’s one area where we could actually see Congress force the administration to back down on tariffs. I think really the risks for a further flareup in North American trade relations is probably less on the other side of the midterms.”
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