CUSMA review and new tariffs weigh heavily on construction and mortgage outlooks
Canada’s looming review of its free trade pact with the United States moves beyond abstract geopolitics and into the nuts and bolts of housing costs, construction pipelines and mortgage risk appetite.
While Ottawa talked about diversifying trade, recent data showed Canada still sent roughly three‑quarters of its exports to the US, leaving builders and lenders highly exposed to cross‑border tensions and tariff shocks on key building materials such as lumber, steel and aluminum.
StatCan figures indicated 75.9% of domestic exports by value went south of the border in 2024, with US-origin goods accounting for nearly half of Canada’s imports.
Ashish Dewan, senior investment strategist at Vanguard, said Canada entered the Canada‑US‑Mexico Agreement (CUSMA) review with a rare edge.
“We have the lowest effective tariff rate from amongst the major trading partners,” he said.
“According to our analysis, the effective tariff rate is only 6%, and for the [rest of the] world it’s somewhere in the teens, between 16% and 19%, [which] puts Canada at a trade advantage.”
Dewan said Section 232 sectoral tariffs, which cover US levies on steel, aluminum and lumber that are generally outside CUSMA's core protections, are the main negative drags on Canada's economy.
He added that goods like aluminum and lumber are critical for US housing construction, binding Canadian producers to US housing plans even as they absorb higher costs.
Renewed US‑Canada trade tensions and geopolitical uncertainty are dampening hopes for a Canadian housing market rebound in early 2026. https://t.co/8CpDSk8igM
— Canadian Mortgage Professional Magazine (@CMPmagazine) January 22, 2026
Dewan said he believes concessions around politically sensitive files could help Canada protect that low‑tariff position. In return for easing some of the sectoral tariffs, “U.S. policy‑makers may want to make American dairy products more readily available in Canada, as well as reforms to the Online Streaming Act,” he said. “I think generally if we provide some concessions to the U.S., they would work with us.”
He described US president Donald Trump’s approach as very transactional. “I think he can be negotiated with, bottom line,” Dewan said, although he warned that Canadian moves to cut tariffs on some Chinese electric vehicles could provoke a backlash if those cars ultimately flowed into the US market. “He doesn’t really want a flood of Chinese EVs going into the U.S.,” he said.
On the domestic front, Dewan said Canada’s medium‑term outlook remain firm, helped by Ottawa’s nation‑building projects – including large commitments to housing, infrastructure and defence – and by the removal of the consumer carbon price in April 2025.
“That actually puts more money in people’s pockets. That is essentially stimulative in nature,” he said. He projected GDP growth of about 1.6% this year and expected the unemployment rate to fall toward 6.2% by year‑end, supported in part by a “labour market [that] is going to recover (and) going to heat up a little bit, because of the slowing population growth.”
For mortgage professionals, US tariffs on softwood lumber and metals risk pushing construction costs higher and worsening affordability, even as rate cuts from the Bank of Canada cushion borrowers.
CIBC, BMO and other institutions also warned that the 2026 CUSMA review could act as a swing factor for future rate decisions, with one chief economist describing a “dark cloud of USMCA … uncertainty” hanging over the outlook for housing and credit.
Canada’s fate remains closely tied to Washington, but not powerless. “If we provide some concessions to the to the US, they would work with us,” he said. “Overall, it does seem to be looking a little bit more optimistic, because the US needs us, and the two countries are fairly linked.”
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