The Canadian housing market, a cornerstone of the national economy, has long been subject to a complex interplay of domestic and international forces. In recent times, one significant external factor has cast a considerable shadow: the ongoing Canada-U.S. trade war. This escalating trade dispute between two of the world’s closest economic partners is sending ripples through various sectors, and real estate, particularly when it comes to securing a primary mortgage, is feeling the impact. Understanding the nuances of this U.S.-Canada trade war is crucial for anyone involved in the Canadian housing landscape, from first-time homebuyers to seasoned investors.
The Chilling Effect of the Canada-U.S. Trade War on Housing
The implications of the Canada-U.S. trade war on the Canadian housing market are multifaceted. Initially, the uncertainty generated by tariff threats acted as a significant deterrent, causing many prospective buyers to retreat to the sidelines. This pause in activity, particularly pronounced in key provinces like British Columbia, Alberta, and Ontario, contributed to a “chaotic start to the year” for the housing market. The threat of new tariffs, especially President Donald Trump’s latest 35% tariff threat, has created an environment of hesitancy, impacting consumer confidence and their willingness to make substantial financial commitments like securing a primary mortgage.
CREA’s latest forecasts underscore this impact. For the second time this year, the Canadian Real Estate Association has downgraded its projection for home sales in 2025. While June saw a modest rebound in home sales (up 3.5% compared to a year ago and 2.8% from May on a seasonally adjusted basis), the overall outlook for the year has been scaled back. CREA now anticipates 469,503 residential properties to be sold in 2025, a 3% decline from 2024. This revision from an earlier forecast of an 8.6% year-over-year increase in January clearly demonstrates how deeply the Canada-U.S. trade war has affected market expectations. The national average home price is also forecast to fall 1.7% annually to $677,368 in 2025, a figure approximately $10,000 lower than previously predicted in April.
When Was the Last Trade War Between Canada and U.S., and What Can We Learn?
The question “When was the last trade war between Canada and U.S.?” often arises amidst current tensions. While direct, widespread “trade wars” with significant tariff escalations are less frequent, historical trade disputes between the two nations are not new. For instance, in 2018, during a previous Trump administration, the U.S. imposed a 25% tariff on Canadian steel and a 10% tariff on aluminum. Canada retaliated with tariffs on over $16 billion of U.S. exports. These past events serve as a reminder of the interconnectedness of the two economies and how such disputes can quickly ripple through supply chains and consumer confidence. The current U.S.-Canada trade war, characterized by renewed tariff threats, echoes these historical precedents, and the housing market is once again a sensitive barometer of the economic fallout. The August 1st deadline for ongoing trade negotiations adds another layer of immediate uncertainty.
Impact on Mortgage Decisions and Buyer Psychology
The Canada-U.S. trade war has a direct bearing on mortgage decisions and overall buyer psychology. Cameron Forbes, a Toronto-area broker, notes that the uncertainty surrounding the Trump tariffs, particularly their potential impact on Ontario’s manufacturing sector, continues to keep many buyers on the sidelines. Even those with job security and home equity are hesitant, swayed by the headlines and the perceived instability created by the U.S.-Canada trade war. This hesitancy translates into fewer sales, as buyers wait to see how the trade negotiations unfold before committing to a primary mortgage.
Furthermore, economists like BMO’s Robert Kavcic point to a “sluggish” job market, exacerbated by the Canada-U.S. trade war, as one of the major factors holding back the housing market. While the Bank of Canada has held its key policy rate steady, mortgage rates, hovering around four percent, are not low enough to significantly improve affordability in a demand-stimulating way. This, combined with a seemingly “bearish” market psychology where falling prices deter buyers, creates a challenging environment for a swift recovery. The prospect of further tariffs stemming from the Canada-U.S. trade war further elevates economic uncertainty, making it harder for potential homeowners to feel confident about long-term investments like a primary mortgage.
Signs of Resilience and the Path Forward
Despite the headwinds created by the Canada-U.S. trade war, there are glimmers of hope for the Canadian housing market. CREA suggests that the rebound originally forecast for this year, though delayed by a few months, may now be materializing. The association points to “pent-up demand, lower interest rates, and an economy that is expected to avoid worst-case tariff scenarios” as potential drivers for recovery. The recovery in sales activity over the past two months has been overwhelmingly led by the Greater Toronto Area, indicating that some regional markets are finding their footing. If the economic uncertainty stemming from the U.S.-Canada trade war can be alleviated, particularly with a positive outcome from the trade negotiations, this delayed activity could very well surface in the summer and fall. CREA now forecasts national home sales in 2026 to improve by 6.3% to 499,081, with the national average home price expected to increase 3% from 2025 to $697,929 next year. This suggests a return to a more stable growth trajectory once the current trade anxieties subside.
Canadian Home Sales & Average Price Forecast
| Year | National Home Sales (Forecast) | Annual Change in Sales | Average Home Price (Forecast) | Annual Change in Price |
| 2024 (Est.) | 477,500 | – | $689,000 | – |
| 2025 (Forecast) | 469,503 | -3.0% | $677,368 | -1.7% |
| 2026 (Forecast) | 499,081 | +6.3% | $697,929 | +3.0% |
Source: Canadian Real Estate Association (CREA)
This table highlights the immediate downturn projected for 2025, a direct consequence of the economic uncertainty largely driven by the U.S.-Canada trade war. However, it also shows an anticipated rebound in 2026, assuming a more stable trade environment.
Mortgage Payment Increases at Renewal (Forecast)
| Renewal Year | Average Increase in Monthly Payments (vs. Dec 2024) |
| 2025 | +10% |
| 2026 | Varied (15-20% for fixed-rate, some variable 40%+, some -7%) |
Source: Bank of Canada
This data from the Bank of Canada underscores the financial pressures many Canadian homeowners are facing, particularly as they renew mortgages taken out during periods of lower interest rates. The added layer of economic instability from the Canada-U.S. trade war only compounds these concerns, making the decision to secure a primary mortgage even more complex.
Navigating Uncertainty and Building a Strong Foundation
The Canada-U.S. trade war presents a significant challenge to the stability and growth of the Canadian housing market. While the recent rebound in sales offers a glimmer of hope, the continued uncertainty surrounding tariffs and trade negotiations keeps many potential homebuyers on edge. The impact on buyer confidence, job market stability, and ultimately, the demand for a primary mortgage, cannot be overstated. However, the underlying fundamentals of the Canadian economy, coupled with pent-up demand and a cautious approach to interest rates, suggest that the market is poised for recovery once the current trade tensions subside.
For homeowners and prospective buyers alike, staying informed about these developments is paramount. Understanding the broader economic landscape, particularly the dynamics of the U.S.-Canada trade war, will be key to making informed decisions about your real estate investments. As the August 1st deadline for trade negotiations approaches, the outcome will undoubtedly shape the trajectory of the Canadian housing market for the latter half of 2025 and into 2026.
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