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This Summer… Make Or Break for Canada’s Housing Market?
The US Supreme Court’s decision to strike down a large portion of Donald Trump’s tariffs last week doesn’t seem likely to change the picture much for Canada when it comes to the ongoing trade war.
But that tariff dispute, which has proven hugely impactful on the national housing market and homebuyer confidence, could face a day of reckoning by July 1.
That’s the cutoff point for review of the Canada-US-Mexico Agreement (CUSMA), a wide-ranging trade deal struck between the three North American allies that’s protected many Canadian industries and exports from the tariff wave Trump launched last year.
The current US tariffs exempt exports covered by CUSMA, meaning Canada has been spared much deeper trade pain – even if the tariffs have battered other sectors like steel, aluminum and automobile manufacturing.
Economists have long flagged the enormous significance of the looming CUSMA review, whose outcome could shape the outlook for Canada’s housing market and wider economy for the remainder of the year.
Those negotiations, and the prospect of Trump suddenly walking away from the deal, make it far more noteworthy than last week’s Supreme Court decision, according to Servus Credit Union chief economist Charles St-Arnaud (pictured top).
“We have bigger concerns coming up this summer with the review of CUSMA,” he told Canadian Mortgage Professional when asked on the possible impact of Friday’s decision. “That will be more consequential in terms of what’s going to happen with tariffs.”
Exemptions have cushioned the blow of Trump’s trade war
Canada’s economy isn’t exactly booming, and certain industries have staggered under the weight of Trump’s tariff regime.
But its condition would be far worse, St-Arnaud pointed out, if it wasn’t for the wide-ranging CUSMA exemptions the Trump administration introduced last year.
“We’re doing OK – not great,” he said. “We need to put it in terms of context. If we compare to where we thought we would have been a year ago, we’re in much better shape. But it’s still not great. It seems like the economy is really at a standstill.
“In terms of growth, in terms of domestic demand, it’s still sluggish. We’re hoping for some improvement in 2026, but it will remain kind of a modest improvement in terms of economic activity this year.”
Hopes of a Canadian housing market recovery in 2025 were dashed when Trump announced his tariff plans, plunging the economy into uncertainty and keeping would-be homebuyers on the sidelines amid fears of job losses and an economic downturn.
If the notoriously trigger-happy Trump walks away from CUSMA in the months ahead, that could cause further chaos, opening the possibility of even wider-ranging tariffs with many industries no longer protected.
Still, it’s unclear for now how likely the president would be to turn his back on those trade negotiations instead of striking a deal.
The Fraser Institute’s Steven Globerman and Jock Finlayson argued this week that recent events could play a big part in constraining Trump and boosting Canada’s chances of a good deal on CUSMA.
“The SCOTUS ruling, coupled with a recent congressional vote to revoke Trump’s emergency tariffs on Canada and disapproval of Trump’s tariffs by a majority of Americans, may strengthen Canada’s hand in the CUSMA review process,” they wrote.
“To the extent that Trump acknowledges that judicial, political and public opinion are turning against his slapdash trade protectionism, he might be more willing to engage in constructive discussions with Canada (and Mexico).”
Good outcome could boost confidence among hopeful buyers
Dominion Lending Centres (DLC) chief economist Sherry Cooper said the result of the CUSMA review could make or break the year when it comes to Canada’s housing market, with plenty of buyers waiting for some better news to emerge on the economy before making their move.
A positive for mortgage market watchers: if those negotiations go well and the outlook brightens for the Canadian economy, an uptick in activity in the second half of the year could be ahead.
“It’s not as though consumer confidence hasn’t improved,” Cooper told CMP, “and interest rates have come down. Home prices are down almost 10%. So people like first-time buyers that have been on the sidelines for four years certainly feel pent-up demand.”
But that doesn’t mean the market will suddenly spring into life if there’s a positive outcome to the trade negotiations, Cooper added, particularly with Toronto’s condominium market showing no signs of recovery.
“Toronto and British Columbia were not only hardest-hit by the tariffs, but there’s also a glut of new condominium housing in Toronto,” she said, “and that’s just going to take time to work off.”
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