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Canada’s commercial real estate industry is beginning to weigh the fallout of U.S. President Donald Trump following through on his threat to impose punishing tariffs on imports from Canada.
Early Tuesday, the U.S. implemented a 25% tariff on most Canadian imports and a 10% tariff on energy resources. The tariffs had been postponed for one month.
In remarks to the Canadian public, Prime Minister Justin Trudeau said Trump wants to see “a total collapse of the Canadian economy” so it will “make it easier to annex us.” The Canadian government retaliated by unveiling tariffs on $155bn worth of imports from the U.S., $30bn of which took effect right away.
Canada and the U.S. are each other’s largest trading partners.
The Ontario Home Builders’ Association warned that the trade war could result in a more challenging development environment.
“Builders across the province are struggling to survive, and this unwarranted act of economic aggression is going to be even more devastating for them,” said Scott Andison, chief executive of OHBA.
“The economic uncertainty around tariffs will lead investors to be extremely cautious before starting any new projects, which means the progress made towards increasing supply in recent years will be eroded. And where available financial capital cannot get a reasonable return, it usually flees the jurisdiction. This would not be good for Ontario or Canada,” the OHBA said.
Borrowers are eyeing cheaper debt as interest rates are expected to fall.
In a BMO Economics note, Douglas Porter, the bank’s chief economist and managing director of economics, said, “We now look for the quarter-point pace to continue in each of the next four meetings until July, taking the rate to 2%.”
Although developers could take a hit on the investment and presale side, lower trade costs could help offset some of the impact.
“If, ultimately, Canada moves to a retaliatory framework on steel and aluminum, we’re moving to a 1% increase in development costs. And if we move to a retaliatory framework on everything from the U.S., we think that’s closer to 4% of development costs,” Andrew Joyner, managing director at Tricon Residential, said at the RealCapital 2025 conference in Toronto last week.
