It’s been more than a year since US President Donald Trump unleashed his tariff terror war, which took the steam out of housing markets across Canada and still has Canadians holding back on home purchases.
The US Supreme Court struck down many of the tariffs last week, but it doesn’t appear to have changed Canadians feelings about the tariffs.
Between now and July 1, there will be a review of the Canada/United States/Mexico trade agreement (CUSMA) that economists say will likely have a much larger impact on Canada’s economy and housing markets.
CUSMA has protected a number of Canadian industries and exports, exempting them from Trump’s tariffs, although some have taken their toll on some sectors including steel, aluminum and automotive.
The coming review of CUSMA could significantly affect Canada’s housing market and wider economy for the remainder of the year, say economists, adding Trump’s history of changing his mind on issues will hang over the review.
“We have bigger concerns coming up this summer with the review of CUSMA, Alberta-based Servus Credit Union Chief Economist Charles St-Arnaud told Canadian Mortgage Professional (CMP). “That will be more consequential in terms of what’s going to happen with tariffs.”
Canada’s economy isn’t performing at high speed, with some industries having staggered under the weight of tariffs. But it could be worse said St-Arnaud if not for the wide-ranging CUSMA exemptions.
“We’re doing OK (but) not great,” he said. “We need to put it in terms of context. If we compare to where we thought we would have been a year ago, we’re in much better shape. But it’s still not great. It seems like the economy is really at a standstill.”
“In terms of growth, in terms of domestic demand, it’s still sluggish. We’re hoping for some improvement in 2026, but it will remain kind of a modest improvement in terms of economic activity this year,” he added.
Trump’s unpredictable nature casts a shadow over the CUSMA review.
Steven Globerman and Jock Finlayson of the Fraser Institute wrote recent events could play a big part in constraining Trump and boosting Canada’s chances of a good deal on CUSMA.
“The Supreme Court’s ruling, coupled with a recent congressional vote to revoke Trump’s emergency tariffs on Canada and disapproval of Trump’s tariffs by a majority of Americans, may strengthen Canada’s hand in the CUSMA review process,” they wrote.
“To the extent that Trump acknowledges that judicial, political and public opinion are turning against his slapdash trade protectionism, he might be more willing to engage in constructive discussions with Canada (and Mexico)."
The CUSMA review, and what comes out of it, could make or break the year when it comes to Canada’s housing markets, with lots of buyers waiting for better news on the economy before moving off the sidelines, Dominion Lending Centres’ Chief Economist Sherry Cooper told CMP.
“It’s not as though consumer confidence hasn’t improved,” said Cooper. “And interest rates have come down. Home prices are down almost 10%. So, people like first-time buyers that have been on the sidelines for four years certainly have pent-up demand.”
Cooper added, “if those negotiations go well and the outlook brightens for the Canadian economy, an uptick in activity in the second half of the year could be ahead,” and cautioned, “That doesn’t mean the market will suddenly spring into life if there’s a positive outcome to the trade negotiations, particularly with Toronto’s condominium market showing no signs of recovery.”
With the all-important spring home buying season approaching, sales to date are below last year’s levels.
