Impact of US Tariffs on Canadian Real Estate

The Trump administration’s 25 per cent tariff on most Canadian goods went into effect earlier this week, shaking up what was expected to be a rebound year for real estate. Even before tariffs were implemented, the threat of an economic upset was enough to cause some home buyers to pause their home-buying activities at the beginning of the year. The Canadian Real Estate Association (CREA) reported a weakening in sales at the end of January, citing uncertainty over the potential for a trade war as a likely reason. 

With the tariffs set in place, for now, many Canadian home buyers and sellers are left to wonder how this will impact the housing market. But this isn’t the first time Trump has subjected Canadian goods to tariffs. Looking at Trump’s first presidency, we can try to make sense of how previous tariff threats played out and how the real estate market reacted. 

In March 2018, Trump announced he would impose a 25 per cent tariff on all steel imports and a 10 per cent tariff on all aluminum imports, increasing economic tension between the U.S. and Canada. These tariffs went into effect in June of the same year, with Canada then imposing retaliatory tariffs in July. Fortunately, both countries agreed to lift tariffs in May 2019, but what happened to the real estate market during that period? 

While CREA noted in its June 2018 stats release that U.S. trade policy frictions might have had an impact on home sales, it’s possible that a larger deterrent to home sales growth was the newly introduced stress test on mortgage applicants, which went into effect in January 2018. 

National home sales experienced continuous month-over-month declines from June 2018 until September 2018, however, these drops may not be entirely related to the economic challenges of the time. It’s typical for real estate activity to peak in the spring and then quiet down during the summer months. 

Even before the tariffs were lifted, home sales steadily improved from January 2019 until May 2019, when national sales reached a peak of 54,599. This peak represented a 6.7% increase from the previous May. After the tariffs were lifted, the positive trend continued, with national sales experiencing year-over-year growth every month until December 2019. 

The national average price held steady without much fluctuation from January 2018 to December 2019. After the tariffs were implemented in June 2018, the national average price declined in July and August. However, similar to national sales, this decline could also have been a reflection of seasonal changes in demand. The average price recovered in September and October, when demand usually picks up again for the fall market, before experiencing another decline in November. 

While there may have been a slight dip in buyer confidence following the introduction of these tariffs, the market dynamics indicate that there were no major disruptions to the expected seasonal fluctuations of Canadian real estate. 

However, when drawing on the past for insights into potential future trends, it’s necessary to consider other economic factors that may have influenced the real estate market. For example, the relatively stable real estate market in 2018 and 2019 was likely bolstered by lower borrowing costs and a resilient labor market.

In contrast, borrowing costs today are significantly higher than they were during that period. For instance, the overnight lending rate never exceeded 1.75% in 2018 and 2019, while the current rate is 3%. After two years of inflation, the Canadian economy in 2025 is navigating a different landscape from when tariffs were first introduced in 2018. The exact impact of tariffs on the real estate market today remains uncertain. However, with supply rebounding, the introduction of longer amortization periods, and the increase in the insured mortgage price cap from $1 million to $1.5 million, coupled with expectations of falling interest rates, there are promising signs that the market could prove to be resilient. 

The fear of the unknown has caused some would-be buyers to retreat to the sidelines again at the beginning of 2025. In its February stats release, the Toronto Regional Real Estate Board (TRREB) reported that year-over-year sales were down by 27.4%. 

Jason Mercer, TRREB’s Chief Market Analyst, explained: “On top of lingering affordability concerns, home buyers have arguably become less confident in the economy. Uncertainty about our trade relationship with the United States has likely prompted some households to take a wait-and-see attitude towards buying a home. If trade uncertainty is alleviated and borrowing costs continue to trend lower, we could see much stronger home sales activity in the second half of this year.” 

However, sellers have not slowed down. New listings in Toronto increased by 5.4% from 2024, and the months of inventory are significantly higher than last February. At that time, the region had only 2.4 months of inventory compared to 3.8 in 2025.

The Canadian real estate market is influenced by a myriad of factors, including interest rates, government policies, population shifts, construction, and economic stability. While the introduction of tariffs might initially seem concerning, it’s important to remember that they are just one of many factors that influence the housing market.

For buyers feeling uneasy about the economy this spring, it’s crucial to remember that real estate trends can vary significantly by location. Concentrate on the dynamics of your specific market rather than the broader economic landscape. Additionally, focusing on what you can control—like your spending and investment choices—can provide a sense of empowerment and direction during uncertain times.

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