Could the de-escalation bring a trade deal within reach?
Canada is scrapping some of its counter-tariffs against the United States, prime minister Mark Carney said on Friday, in an effort to boost prospects of a trade deal after talks recently stalled.
The move will see 25% tariffs removed on a long list of consumer products made in the US and compliant with the Canada-US-Mexico Agreement (CUSMA), starting September 1.
While certain tariffs including levies on US steel, aluminum, cars, and trucks will remain in place, the move is seen as a bid to de-escalate the trade war and a concession to the United States, which had viewed the measures as a barrier to negotiations. Canada’s levies against the US now match the tariffs put in place by Trump.
Trump greeted the news positively, saying he liked Carney “a lot,” and left the door open for a deal. “We are working on something. We want to be very good to Canada,” he told reporters.
Carney’s move is expected to set the stage for a coming renegotiation of CUSMA and follows a phone conversation between the two leaders on Thursday.
What the latest trade war development could mean for housing
The impact of the news on markets remains to be seen. The relaxation of counter-tariffs will likely be broadly viewed as a positive step towards ending the tariff war, reducing trade uncertainty and supporting growth.
Financial markets reeled at the beginning of the year when Trump announced a wave of tariffs on Canadian imports, a move that stoked fears of a potential sharp economic downturn and mass layoffs in Canada.
But reports in recent weeks have suggested that while chances of a trade deal are currently remote, the Canadian housing market is slowly finding its feet amid the economic turmoil.
And a Royal Bank of Canada (RBC) report released this week indicated that Trump’s tariffs have left the overall North American economic outlook largely unchanged, with over 90% of Canadian exports shielded from levies because they’re CUSMA-compliant.
Still, the tariffs – and the continuing economic uncertainty they’ve generated – are weighing against the homebuilding outlook in Canada, particularly Ontario, the Canadian Home Builders’ Association (CHBA) chief executive officer Kevin Lee told Canadian Mortgage Professional.
Ontario shed 38,000 jobs in the second quarter of 2025 as tariffs bit into the province’s industrial base, the Financial Accountability Office of Ontario (FAO) said, while its unemployment rate rose for the ninth quarter in a row and jumped to 7.8%.
But for now, Carney’s olive branch to Trump likely avoids a further ramping-up of tensions between the two countries, which Scotiabank analyst Patrick Perrier described as one of the biggest threats to the Canadian housing market’s current slow recovery.
Meanwhile, remarks by Federal Reserve chair Jerome Powell on Friday indicated the US central bank is ready to bring rates lower and put some downward pressure on five-year Government of Canada bond yields, which strongly influence Canadian mortgage rates.
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