Hopes were high that a trade deal could help bring homebuyers off the sidelines. Then Trump fired off yet another tariff bombshell
Compared with the chaos of 2025’s first quarter, recent weeks had seen a degree of calm on the tariff front, with talks continuing between the US and Canada on reaching a trade deal to end that prolonged spat.
But on Thursday, US president Donald Trump issued a stark reminder of the huge threat the tariff war poses to the Canadian economy, vowing to slap a 35% blanket tariff on imports from Canada at the beginning of August.
That marks a fresh escalation in the neighbours’ tariff dispute and likely plunges the Canadian housing market into further uncertainty, with trade tensions a key reason for the market’s sluggishness in the year to date.
Just before Trump’s tariff bombshell, Royal Bank of Canada (RBC) sounded a positive note on the housing outlook, noting that buyers appeared to be stepping off the sidelines thanks to an easing in trade war tensions – even though that return to market was “far from a stampede.”
Now, mortgage market watchers face an anxious wait ahead of the beginning of August to see if Trump intends to follow through on his tariff threat, or whether the president is simply using potential new levies as a bargaining chip.
For the moment, plenty of buyers are stuck in limbo as they await further clarity on the tariff dispute and a potential sharp downturn in the Canadian economy.
Toronto broker Micky Khaneka (pictured top) told Canadian Mortgage Professional clients working in tariff-impacted industries were especially cautious about pushing ahead with a home purchase.
“People are nervous with the tariff talk and the uncertainty with the news,” he said. “It’s hard for people to make confident decisions, especially when there’s so much of [that] uncertainty.
“And a lot of times when they’re hearing that OK, this might impact their industry directly or indirectly, people hold off from making big purchases that could directly impact their personal life.”
Despite widespread media concerns about a looming “mortgage shock,” aggregate mortgage payments across Canada are actually declining, according to a recent report from TD Economics. https://t.co/TiXa3iTWpp
— Canadian Mortgage Professional Magazine (@CMPmagazine) July 11, 2025
BoC unlikely to come to the rescue with immediate rate cuts
Some prospective buyers are also waiting for interest rates to drop before they step into the market, with hopes still high that the Bank of Canada will start to cut rates again in the second half of the year.
The central bank has left rates unchanged in its last two decisions as it weighs up the likely impact of the trade war on the Canadian economy, and the possibility that counter-tariffs could spur an uptick in inflation.
But while most experts expect the economy will begin to slow soon, hotter-than-expected labour market data released on Friday appeared to all but rule out a July rate cut by the central bank.
Canada’s economy added 83,000 jobs in June, Statistics Canada said, while the unemployment rate also inched lower to 6.9%.
‘I’m hopeful that it’s going to get better’
Unless Tuesday’s inflation reading reveals a significant drop – viewed as unlikely – the Bank will probably keep rate reductions on ice this month despite Trump’s tariff threats.
That means for now, activity across major housing markets is likely to remain muted, especially in Toronto’s beleaguered condo sector where high rates and cooling demand have pummelled investors and landlords.
While RBC highlighted certain areas including the Prairies and Atlantic regions for their housing markets’ relative resilience, Toronto’s condo meltdown has fuelled an overall slump in the Ontario real estate market.
“I’m always optimistic so there’s a part of me that really wants it to get better,” Khaneka said. “But [that’s not] the reality on the ground, unless rates go down to a point where people start to see value in condos as an investment or to occupy.
“We have a good 12- to 13-month supply in the condo market, and sometimes stuff like that takes time to dry up before it could rebound. There’s just so many factors on that front. I’m hopeful that it’s going to get better – I just don’t know how long we have to go through this pain before it actually improves for everyone.”
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