The impact of Donald Trump’s tariffs on the Canadian real estate market

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March 13, 2025

The impact of Donald Trump’s tariffs on the Canadian real estate market

Main information:

Donald Trump’s tariffs will have a direct impact on the Canadian real estate market, increasing construction costs and reducing developer margins.
New home prices are expected to rise, prompting some buyers to turn to recently renovated existing properties.
The rental market is under pressure, with supply likely to shrink due to investor withdrawal and higher renovation costs, leading to higher rents.
The evolution of interest rates will be key: a rise would reduce access to credit, while a fall could boost demand for real estate.
Buyers should opt for fixed-rate loans to protect themselves against interest rate fluctuations and anticipate market trends.
Sellers need to assess their situation and the state of the local market before making a decision: sell now to secure a transaction, or wait for the market to stabilize.
Real estate remains a safe long-term investment, but in this uncertain environment, the key is to be well informed and adopt a strategy tailored to your objectives.

The Canadian real estate market is going through a period of uncertainty. With Donald Trump’s increased tariffs, construction costs are soaring, developers are reviewing their projects and buyers are worried about the repercussions on housing prices. Should we expect new-build prices to soar? A slowdown in new construction? Increased tension in the rental market?

From visible consequences to long-term effects, let’s find out how these protectionist measures are reshaping Canada’s real estate landscape – and, above all, how to anticipate these changes and take advantage of them.

Time needed: 8 minutes

Quels sont les tarifs douaniers imposés par Donald Trump ?
The impact of tariffs on the Canadian real estate market
Tips for real estate buyers and sellers in light of Donald Trump’s tariffs

Watch Kyle’s video analysis :

Quels sont les tarifs douaniers imposés par Donald Trump ?

In March 2025, the Trump administration imposed a 25% tax on a wide range of products imported from Canada, marking a new escalation in trade tensions between the two countries. These tariffs are designed to protect American industry and reduce US dependence on foreign imports.

In addition to steel and aluminum, these taxes also affect other industrial and manufactured products.

Why did Donald Trump introduce these tariffs?

The Trump administration justified these tariffs with several strategic and economic arguments:

Protecting U.S. industry: By making imports more expensive, the U.S. government aims to support domestic steel and aluminum production, in order to preserve jobs and reduce dependence on imports.
National security and industrial autonomy: According to the Trump administration, steel and aluminum are strategic resources necessary for national defense, and over-reliance on imports could compromise U.S. economic sovereignty.
Rebalancing trade with Canada: Donald Trump has often criticized U.S. trade deficits and used these taxes as negotiating leverage to secure better trade terms in the Canada-U.S.-Mexico Agreement (CUMA).
Political pressure on Canada and Ontario: Ontario retaliated by imposing a 25% tax on electricity exported to three U.S. states (New York, Michigan, Minnesota). Faced with this escalation, Donald Trump threatened to double tariffs, before finally backing down under political pressure.
Security and immigration: To justify these measures, Donald Trump believes that they will encourage the Canadian government to strengthen migratory security at its border and reduce drug trafficking.
Pressure on defense budgets: Finally, Donald Trump believes that Canada’s contribution to military alliances is too low compared to that of the United States, and is using these measures to put pressure on the Canadian government.

How did Canada react to the U.S. tariffs?

In the face of this trade attack, Canada has deployed a swift and aggressive response to minimize the impact on its economy and industry.

Tariff countermeasures: The Canadian government retaliated by imposing tariffs on $29.8 billion worth of U.S. products, including not only steel and aluminum, but also industrial and manufactured goods.
Diversification of trading partners: To limit its dependence on the United States, Canada is speeding up the signing of agreements with other regions, notably the European Union and Asia, to secure supplies of essential materials.
Support for Canadian industries: The government has set up financial assistance for affected companies, particularly in the manufacturing and construction sectors, which use large quantities of steel and aluminum.
Trade negotiation strategy: In response to the tensions, Canada continued to negotiate with the U.S., while preparing a second wave of retaliatory tariffs on $125 billion worth of U.S. imports to take effect in April.

“Tariffs aren’t just about trade; they redefine the balance of economic relations between Canada and the United States. Behind the protectionist rhetoric, there are very real consequences for Canadian businesses and consumers.“

Kyle Shapcott – Leader in real estate

The impact of tariffs on the Canadian real estate market

The tariffs imposed by the Trump administration are likely to have a significant impact on the Canadian real estate market. These protectionist measures will most certainly have an impact on construction costs, interest rates, financing, affordability and the Canadian economy in general.

Impact of Donald Trump’s tariffs on construction

Construction slowdown due to price uncertainty

Unstable prices for building materials, exacerbated by tariffs, are likely to lead to a marked slowdown in real estate projects. With developers reluctant to launch new projects due to volatile costs, this will disrupt project planning and execution, and ultimately exacerbate the housing crisis.

Estimated increase in construction costs

Tariffs have driven up the price of essential materials such as steel and aluminum. This increase in costs is having a direct impact on real estate project budgets, making some projects less financially viable and profitable than initially anticipated.

“The worst part is not even the tariff. It is the disruption and uncertainty,”
Ted Betts, The Globe and Mail

Heavy reliance on American materials

Canada imports a significant proportion of its building materials from the United States. This dependence makes the sector vulnerable to price fluctuations resulting from US tariff policies, increasing supply costs and lead times. Costs, projects and construction starts are likely to see a negative impact following the introduction of Donald Trump’s tariffs.

Lower margins for real estate developers

The rising cost of materials, combined with a shortage of available materials, is leading to a reduction in profit margins for developers. This financial pressure can limit their ability to invest in new projects, affecting the supply of housing on the market.

In short, the tariffs imposed by the Trump administration have had a considerable impact on the Canadian real estate market, and particularly the construction market, by increasing costs and creating uncertainty that curbs developers’ initiative.

Impact on the real estate market

The impact of Donald Trump’s tariffs is not limited to construction costs. This has a direct impact on the housing market, both for new builds and for older, renovated properties. As the price of materials rises and developers’ margins shrink, the price of new homes will inevitably rise, while old and renovated real estate will become a more sought-after alternative for buyers.

Rising new home prices: an inevitable effect

The rising cost of building materials, particularly steel and aluminum, will have a direct impact on the final price of new homes:

Property developers will pass on this increase in selling prices to maintain their profitability, making the purchase of a new home more expensive.
Uncertainty about the future of rates is prompting some buyers to buy new properties now, for fear of soaring costs in the years ahead.

As a result, buyers who were hesitating between a new home and an existing property may be forced to review their budget or turn to other solutions.

A domino effect on the market for old and renovated homes

With new-build prices on the rise, older and recently renovated homes are becoming an increasingly popular alternative.

Buyers who anticipate rising renovation costs will prefer properties that have already been modernized, thus avoiding the risks associated with rising material prices. In addition, increased demand for renovated properties will drive up prices in this segment of the market, making these properties more competitive with new builds.

A tense rental market

Tariffs not only affect the cost of construction: they also weaken the rental market, making real estate investment less attractive.

With higher acquisition costs and rising renovation costs, investors are seeing their profitability fall. Many will be more reluctant to buy rental property, or even turn away altogether. If this were the case, we’d see fewer new rental units on the market, which would exacerbate the shortage of available housing, especially in big cities, and could push rents unreasonably high.

What’s more, if banks tighten their lending conditions due to an uncertain economic climate, it will become more difficult for many households to access home ownership.
Those who can’t afford to buy will remain tenants for longer, which will increase demand on the rental market and mechanically drive up rents.

Thus, the tariffs imposed by Donald Trump are likely to have a major impact on the construction sector. With rising construction and renovation costs, the effects on the market would cascade:

New housing will become more expensive and less accessible.
Renovated properties will appreciate in value, as they avoid buyers incurring unpredictable costs for work.
Investors will gradually withdraw from the rental market, which could have an impact on the supply of available rental properties.
Upward pressure on rents due to increased demand and limited supply.

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Impact of Trump’s tariffs on real estate financing and the economy

The impact of a probable fall in interest rates

Central bank decisions are strongly influenced by inflation and economic growth. However, the imposition of tariffs can create inflationary pressures, which complicates interest rate management.

Situation if rates rise

If inflation picks up again, we’re likely to see higher rates and reduced affordability.

Rising material costs and the knock-on effect on housing prices could contribute to higher inflation. Faced with this, the Bank of Canada could be forced to raise interest rates, making home loans more expensive and reducing affordability.

Situation if rates fall

If inflation is kept under control, we’ll see rates fall to support the economy.

If the economy shows signs of slowing, the Bank of Canada could cut interest rates to stimulate demand and avoid a recession. Lower rates would make home loans more affordable, encouraging more buyers to enter the market. This would be good news for the real estate market, to support buying demand and maintain the sector’s dynamism.

Beware of variable-rate loans: Borrowers who opt for variable-rate loans are particularly exposed to interest rate fluctuations. In the event of a sudden rise in interest rates, their monthly payment could increase considerably, affecting their ability to repay and increasing the risk of default.

Stricter loan conditions and declining purchasing power

Banks play a key role in housing affordability, and the economic tensions created by tariffs could lead them to tighten their financing conditions.

If interest rates rise, banks may tighten lending conditions

High inflation combined with rising interest rates would encourage banks to be more selective in granting loans. Stricter debt criteria could exclude certain buyers, notably first-time buyers and low-income households.

Fewer sellers on the market, buyers forced to target more affordable properties

With a more uncertain market and higher financing costs, some owners may postpone the sale of their property, creating a reduction in available supply. At the same time, buyers constrained by tighter financing conditions could be forced to scale back their budgets and opt for smaller properties or those located on the outskirts of major cities.

At the same time, if interest rates fall in response to an economic crisis or a slowdown in inflation, several effects can be expected:

Increased demand for real estate: cheaper loans would encourage more buyers to invest.
Rising prices: increased demand without sufficient supply would put upward pressure on housing prices.
Opportunities for investors: lower rates could encourage property purchases for rental purposes, boosting rental investment by offsetting losses due to construction costs.
Lower borrowing costs for existing homeowners: those with variable-rate loans could see their monthly payments fall.

Tips for real estate buyers and sellers in light of Donald Trump’s tariffs

The tariffs imposed by the Trump administration and their effects on the Canadian economy are raising questions about the advisability of buying real estate in this context. Between fluctuating interest rates, rising construction costs and economic uncertainty, it’s essential for buyers to adopt the right strategy to secure their investment.

Tips for buyers

Opt for fixed rates

The evolution of interest rates is a key factor to consider before buying a property. In times of uncertainty, it’s better to opt for a fixed-rate loan rather than a variable-rate one.

The Bank of Canada’s decisions depend on inflation and economic trends, making variable-rate loans unpredictable at this time. What’s more, if interest rates rise, monthly payments can increase considerably, making repayment more difficult for borrowers.

On the other hand, a fixed-rate loan makes financing more secure and avoids unpleasant surprises in the long term. Opting for a fixed rate guarantees better budget management and protects you against possible increases that could affect affordability.

Be optimistic about the long-term vision

Despite economic fluctuations and periods of trade tensions, real estate retains its value over the long term. Several factors explain this resilience:

Demand for housing remains strong in many regions, particularly in large cities where supply is limited.
Real estate is a tangible asset, offering protection against inflation and economic crises.
Historically, periods of uncertainty have often been followed by stabilization or even recovery in the real estate market.

While some fluctuations are inevitable, real estate remains a solid investment option for those with a long-term approach and a prudent financing strategy. While the tariffs imposed by Donald Trump may remain in force for up to 4 years, your real estate investment is in a much longer cycle, allowing it to look to the future with serenity.

Tips for sellers

Salespeople are also faced with strategic decisions in the face of economic uncertainty. Interest rate volatility and market trends have a direct impact on the demand for and valuation of real estate.

Selling now: a strategic choice depending on the market

Selling immediately can be a good decision in some cases:

If demand in the sector is strong, especially for well-located or recently renovated properties.
If the aim is to avoid a potential drop in prices due to an economic slowdown or a rise in interest rates.
If financing becomes more difficult for buyers, this could limit their purchasing capacity in the medium term, and therefore demand.

In a context of uncertainty, setting a realistic and competitive price can help close a sale more quickly and avoid possible future depreciation.

Waiting to sell: an option to consider depending on market stability

For some sellers, it may be more interesting to wait if :

The local market is growing and demand shows no signs of slowing down yet.
Economic conditions could improve in the medium term, encouraging a recovery in prices.
The property generates stable rental income and there is no urgent need for the owner to sell.

However, there are risks to waiting, particularly if interest rates rise, which could reduce the number of qualified buyers and put downward pressure on prices.

Making the best decision to sell your property?

The sales strategy must be adapted to market conditions and the seller’s specific needs.

Analyze local market trends and short- and medium-term prospects.
Consult a real estate expert to obtain an accurate valuation and adjust your selling price according to demand.
Evaluate alternatives, including temporary rental of the property if the aim is to wait for a more favorable market.

The key is to adopt a flexible approach and keep a close eye on the real estate market and interest rates to make an informed decision.

Conclusion

Donald Trump’s tariffs have created a shockwave that will be felt at many levels of the Canadian real estate market. Between rising construction costs, the impact on house prices, rental market tensions and interest rate uncertainties, these protectionist measures are redefining the dynamics of the sector.

While developers and buyers have to cope with higher costs, investors and sellers face complex strategic decisions in an uncertain economic climate. Yet real estate remains a long-term safe haven, and opportunities remain for those who adopt a considered approach and adapt to new market realities.

Whether you’re buying, selling or investing, it’s essential to be well informed, to keep abreast of changes in interest rates and financing conditions, and to anticipate market fluctuations.

Good preparation and an appropriate strategy will enable you to take advantage of this period of uncertainty and make informed choices. Contact our team of Montreal real estate brokers to make your real estate dreams a success.

Kyle Shapcott

kyle@equipels.com

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Kyle has been an expert on the real estate market for over 10 years. He is passionate about Montreal and the city’s real estate sector and regularly shares his analysis and advice in his articles.

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