The tariff storm front has long loomed in Canada, with the incoming U.S. administration first pledging to impose tariffs on Canadian and Mexican imports in November 2024, while the initial imposition took effect in February 2025, followed by a brief 30-day pause, then the subsequent reimposition in March 2025. Thereafter, a series of retaliatory tariffs, threats, rescindments and additional levies have followed, while trade negotiations with Canada and the U.S. have commenced, stalled and resumed once more.
The globe continues to face a wave of uncertainty, along with gale-force economic headwinds, attributed in large part to President Trump’s tariff regime. The current economic and political storm was not without warning, foreshadowed by the appointment of a US administration focused on tariffs, initial levies on Canada and Mexico, and equity- and bond-market volatility.
As such, Green Street previously has revised its Canadian macroeconomic estimates lower. Knock-on effects across the Canadian real estate sectors are expected to differ based on 1) the economic sensitivity of the sector; 2) tariff-specific impacts that result over the next 12 to 18 months; and 3) potential long-term changes to landlord and tenant behaviour.
Most recently, President Trump announced plans to levy a higher 35% tariff on Canadian imports, from the current 25%, taking effect on Aug. 1. Canadian imports traded under the U.S.-Mexico-Canada Agreement will remain exempt, while the 10% tariffs on Canadian energy products and 50% tariffs on Canadian aluminum and steel are expected to be unchanged.
Alongside higher tariffs on Canadian imports, Trump reportedly is seeking to impose a higher blanketed tariff of 15% to 20% on U.S. trading partners, from the current 10% charge. While uncertainty remains with regard to the ultimate outcome of trade negotiations and timelines with the U.S. and its global trade partners, tariffs are broadly expected to be a downdraft on economic growth, boosting inflation while pressuring job creation.
The softening of the Canadian labour market is plain, with the lowest first-half job creation total since 2018.
Overall, downward revisions to economic metrics, including GDP growth, inflation and employment, will have a meaningful impact across all property sectors. However, we note that the industrial, office and retail sectors are likely to face greater headwinds in the near to medium term relative to apartments, given their greater sensitivity to GDP.
Following the introduction of U.S. tariffs in February 2025, the Canadian economy had posted four consecutive months of either minimal job growth or job losses, though June data proved a surprise. In that month, 83,100 jobs were added, driven largely by part-time employment gains, pushing the unemployment rate down slightly to 6.9%.
While the most recent labour market survey release hints at a reversal in trend and offers somewhat of a rebuttal against tariff-related employment concerns, the softening of the Canadian labour market is plain, with the lowest first-half job creation total since 2018 (excluding the pandemic period). Further, a greater proportion of Canadians surveyed have reported that they feel security has eroded.
The softening in the Canadian labour market, as evidenced by recent job losses, has been concentrated in sectors most directly impacted by tariffs, led by declines in manufacturing, business services, transportation and warehousing, followed by agriculture, accommodation and food services, and construction.
Across Canada, Green Street prefers larger markets, with more diversified economies and stable public employment bases.
By province, jobs losses through May were led by Ontario, followed by Quebec and Alberta, which account for three of the top four provinces by measure of exports to the U.S. as a percentage of GDP. However, in June, job growth across the provinces was led by Alberta, Quebec, Ontario and Manitoba, potentially signalling an overreaction in previous tariff-related job cuts.
We note that while exports to the U.S. make up ~35% of GDP in Alberta, the province is somewhat isolated from the impact of tariffs given its heavy reliance on the oil-and-gas sector, which faces lower tariffs relative to other exports.
As GDP growth expectations have adjusted lower and the Canadian labour market has softened, fears of a stagflationary environment have emerged, as tariffs are broadly expected to boost inflation. As of June, Canadian CPI has broadly continued to trend lower, rising 1.9% year over year, while longer-term inflation expectations reflect only a modest increase from current levels, albeit well within the Bank of Canada’s targeted range of 1% to 3%.
To the extent that a trade resolution is not met, the application of tariffs over the longer term could shift inflation expectations higher, which, combined with a slowing job market, could put additional pressure on the Canadian consumer. Nevertheless, the Bank of Canada has shifted its focus to monitoring the impact of tariffs on the overall Canadian economy, with additional policy rate cuts broadly expected in the event of further softening.
Across its Canadian private-market coverage, Green Street continues to monitor the impacts of the current tariff regime and highlights its conservative outlook with respect to M-RevPAF forecasts (a combined measure of effective market rents and occupancy) and private-market IRRs.
Across the board, Green Street has previously lowered its M-RevPAF forecasts, reflecting tariff headwinds, as well as significant supply growth across the apartment and industrial sectors, muted demand in the office sector and stable occupancy levels for retail. Private-market IRRs also have been previously revised lower, though they continue to favour the industrial sector, followed by retail, apartment and office.
Across Canada, Green Street prefers larger markets, with more diversified economies and stable public employment bases.
