How the U.S.-Canada Trade War Is Reshaping Real Estate

As tariff tensions between Canada and the United States grow, the economic ripple effects are being felt across the North American real estate landscape. With the U.S. imposing tariffs of 25 percent on Canadian steel and aluminum and 10 percent on energy, Canada has responded with countermeasures targeting $29.8 billion in American goods. According to the Government of Canada, these policy moves are part of a dollar-for-dollar retaliation strategy. The resulting uncertainty is weighing on housing markets by lowering consumer confidence and raising questions about future construction costs and investment flows.

In Canada, consumer confidence has weakened, contributing to a 3.3 percent drop in home resales over the past two months, despite an 11 percent jump in new listings between December 2024 and January 2025. As noted by the Canadian Real Estate Association, this reflects a public hesitant to make large purchases in a volatile climate. In the United States, a similar trend is emerging. According to Reuters, new home sales dropped 10.5 percent in January 2025, even though housing inventory reached its highest level since 2007. High mortgage rates and persistent inflation continue to deter buyers.

Interest rates are a crucial factor in this shifting environment. In Canada, the Bank of Canada is widely expected to cut rates further, with projections ranging from 2.5 percent to as low as 1.5 percent by the end of 2025, as reported by Bloomberg and Canadian Mortgage Trends. Lower interest rates are expected to stimulate borrowing and home purchases. In contrast, the U.S. Federal Reserve has taken a more cautious stance, holding policy rates steady between 4.25 and 4.5 percent. The widening gap in interest rates between the two countries could attract foreign capital to Canada’s relatively cheaper credit market.

The weakening Canadian dollar, which has fallen six percent against the U.S. dollar since July 2024, is also having a mixed impact. Speaking to RE/MAX, analysts suggest that foreign investors may view Canadian real estate as a hedge against currency risk. The depreciated currency and lower interest rates could make Canada more attractive for those looking to invest in tangible assets. Meanwhile, in the U.S., demand is shifting toward rental markets as younger demographics are priced out of homeownership. The National Association of Home Builders warns that tariffs on steel and aluminum will raise construction costs, leading to higher rents and reduced supply.

In both countries, tariffs are expected to increase the cost of building materials. According to RBC, the Canadian economy could see a $24 billion impact from reduced steel and aluminum exports. This will likely cause developers to slow down new housing projects, tightening supply and putting upward pressure on home prices. As Peakhill Capital Vice President Chaim Karpel explains, Canada must use this trade war as a strategic turning point. By focusing on innovation, workforce development, and trade diversification, the country can reduce future vulnerability and emerge more competitive on the global stage. For more insights on the housing market and economic trends, visit WeeklyVoice.com and explore our Canada news section.