Always Neighbours, Never Neighbors: What Trump's 25% Tariffs Mean for Canada’s Housing Market

If there’s one thing we Canadians know, it’s that the U.S. can’t help but meddle in our affairs—whether it's criticizing our healthcare system (while secretly envying it) or attempting to turn us into the 51st state. And now, in true Trumpian fashion, Trump has officially imposed a 25% tariff on imports from Canada and China, effective February 1, 2025, while Mexico has secured a one-month pause on its tariffs (Business Insider). While the full impact of these tariffs remains speculative, experts predict significant ripple effects through multiple industries—including real estate.

In response, Canadian Prime Minister Justin Trudeau has announced countermeasures, including 25% tariffs on specific U.S. goods, increased tariffs on consumer goods such as dairy, poultry, and fresh produce, and a ban on U.S. alcohol sales in Canadian stores (Politico). These retaliatory actions aim to offset the economic damage caused by the tariffs while sending a clear message that Canada will not be pushed around.

So, what happens when your "friendly" next-door neighbour decides to tax the hell out of your goods? Let's break it down and see how this could impact Canadian real estate and everyday life, though much of this remains uncertain and speculative.

How Will the Tariffs Impact Canadian Real Estate?

Tariffs have far-reaching effects on construction, supply chains, and employment. Here are some key areas that will feel the squeeze:

1. The Construction Industry

Canada supplies nearly 80% of U.S. softwood lumber imports, making lumber one of the hardest-hit materials. With a 25% tariff in place, Canadian builders will also face rising costs as imported materials from the U.S. become more expensive. This means higher costs for everything from wood to windows, making new home construction and renovations significantly pricier. In 2023, the average price of softwood lumber per thousand board feet was $600, and experts predict a 30-40% increase due to the tariffs (StatCan).

2. Manufacturing Hubs (Toronto, Windsor, Hamilton, Alberta)

Canada’s manufacturing sector, particularly in Ontario and Alberta, exports over $400 billion worth of goods to the U.S. annually. In total, Canada-U.S. trade amounted to $960.9 billion in 2022, making the U.S. Canada’s largest trading partner and accounting for 65% of Canada’s total global trade (CRS Reports). A trade war with the U.S. would lead to job losses or wage cuts in these regions, reducing homeownership demand and slowing housing market activity, especially in areas with large manufacturing employment bases. Ontario alone employs 750,000+ workers in the manufacturing sector, many of whom may be affected by these trade disruptions.

3. Rising Costs for Everyday Canadians

Beyond real estate, the tariffs are expected to drive up prices on everyday essentials. With higher tariffs on U.S. dairy, poultry, and fresh produce, Canadian grocery bills could rise significantly. In 2024, the average Canadian household spent $15,500 annually on food, and experts predict an increase of 5-10% in grocery costs due to these tariffs (Canada Food Price Report). This will put further strain on household budgets, making it harder for people to save for down payments or keep up with rising housing costs.

The cost of imported household goods, such as cleaning supplies, toiletries, and packaged foods, is also expected to rise. A 12% increase in consumer goods prices is forecasted for 2025, impacting Canadians who are already struggling with inflation.

4. Real Estate Investment & Foreign Buyers

Foreign buyers are already restricted by Canada’s foreign buyer ban until 2027, which limits non-residents from purchasing property. If the economy weakens due to tariffs, investors—both domestic and foreign—may further hesitate to enter the market. With rising costs and potential layoffs, many Canadians may delay homeownership, leading to stagnation in certain markets. Toronto and Vancouver, where foreign investment has historically played a role in housing demand, could see cooling effects (Government of Canada).

5. Interest Rates & Economic Uncertainty

The intensity of this trade war remains a key unknown. BMO’s chief economist, Doug Porter, predicts the tariffs could reduce Canada's GDP growth by around 2% and possibly slide the economy into a modest recession if they remain in place for a year. In response, the Bank of Canada is expected to cut its policy rate by 0.25% at every meeting until October 2025, bringing it down to 1.5% (BMO Economics).

Lower borrowing costs could provide a silver lining for homebuyers, making mortgages slightly more affordable, but the broader economic uncertainty could offset these gains. Housing demand may suffer if layoffs increase and household budgets tighten.

6. Government Response & Policy Measures

In addition to its 25% tariffs on certain U.S. goods, Canada’s government is considering additional economic responses to stabilize domestic industries and protect homeowners. The ban on U.S. alcohol sales in Canadian stores is expected to impact American exports significantly while encouraging local Canadian producers to fill the gap in the market. Additionally, the federal government is rumoured to be exploring housing affordability relief measures, such as expanding the First-Time Home Buyer Incentive to offset rising costs due to trade policies.

Final Thoughts

With the 25% tariffs now in effect, the Canadian economy and real estate market could face significant challenges. Meanwhile, Trudeau’s countermeasures, including tariffs on U.S. goods, higher costs on food and household essentials, and banning U.S. alcohol from Canadian stores, show that Canada isn’t backing down.

At the same time, Mexico has secured a one-month delay on tariffs, adding further uncertainty to the evolving trade situation. Whether this delay results in a broader negotiation or merely postpones the inevitable remains to be seen.

From construction costs to mortgage rate cuts and rising grocery prices, Canadian real estate and everyday life could see serious disruptions if the trade war escalates. However, much remains speculative, and the actual effects will depend on how long the tariffs remain in place and how both governments respond.

If you're a homeowner, buyer, or investor wondering how these economic shifts might impact your real estate decisions, let's talk. I can help you strategize your next move in this changing market. Whether you're looking to buy, sell, or invest, having the right plan in place now can save you money and position you for success.

📩 Get in touch today to discuss your options and make the smartest real estate moves in uncertain times!