How the Trade War May Shape U.S. and Canadian Real Estate Markets—and Why It Might Benefit Housing Markets

Market Insights

The trade war between Canada and the U.S. continues to escalate as both countries take a dollar-per-dollar approach to their tariff policy. As of now, the U.S. has moved forward with 25% tariffs on steel and aluminum imports as well as a 10% tariff on Canadian energy.1 In response, Canada has enacted countermeasures on a select list of aluminum and steel imports as well as additional imported U.S. goods totalling $29.8 billion.1 Given the uncertainty surrounding the future of tariffs and their long-term impact on U.S. and Canadian housing markets, investors must remain vigilant to shifting market conditions, as factors including consumer confidence, interest rates, foreign investment, and housing prices continue to shape the real estate market’s underlying dynamics.

Consumer Confidence

Canada 

Consumer confidence remains low with the knowledge that aggressive tariff policies could create recessionary economic responses such as wage stagnation, increased inflation, and higher unemployment. Although new listings nationwide have jumped 11% from December 2024 to January 2025, to soften prices and release pent-up demand, home resales have declined by 3.3% in the past two months.2 This is to be expected, as uncertainty casts a shadow on the Canadian economy, prompting consumers to exercise caution in their spending.

Residential New Listings Canada*

*Seasonally adjusted data based on annualized rates 

Source: Canadian Real Estate Association, Peakhill Capital 

United States 

The U.S. Consumer Confidence Index remains in decline as mass firings of federal workers and potential trade wars have created pessimism amongst consumers regarding the economic outlook.3 Similar to Canada, the U.S. experienced an influx of new housing in January 2025 with new inventory at the highest level since late 2007.4 Despite this, new home sales dropped 10.5% in January as mortgage rates and prices remain high.4 

Interest Rates  

Canada 

Interest rates have declined with the Bank of Canada projected to further cut rates in response to aggressive tariff policies from the U.S.5 According to the Bloomberg Survey of Forecasters, rates are expected to settle at 2.5% in the last quarter of 2025.6 Other forecasters, such as  BMO, predict even higher rate cuts with rates predicted to be 1.5% by the end of 2025.7 Regardless, interest rates are expected to continue to trend downward, which will reduce ownership costs and help release pent-up demand.

Bank Of Canada Interest Rates

Source: Bank of Canada, Peakhill Capital 

United States 

Policy interest rates remain higher in the U.S. than in Canada with Bloomberg projecting a rate of 3.75% by the end of 2025.6 Monetary policy from the Federal Reserve remains cautious as the federal funds rate remains steady at 4.25% – 4.5% in January despite three consecutive reductions in 2024.8 It is unclear if more cuts are to come as the Federal Reserve continues to monitor the inflation rate.

Widening Difference Between U.S. and Canadian Interest Rates 

Implied by the overnight index swap, daily data

Source: Bloomberg Financial LP and Bank of Canada Calculations, Peakhill Capital

Foreign Investment 

Canada 

According to data from the Bank of Canada, the Canadian dollar has depreciated against the USD, falling 6% from the beginning of July 2024 to February 28, 2025.9 Canadian foreign investment may benefit from the depreciated dollar, making Canada an increasingly attractive option for outside investors, particularly those with currencies that have appreciated against the Canadian dollar. Canadian investors looking to diversify their portfolios to protect their investments against exchange rate volatility may benefit from investing in Canada as opposed to abroad.10 Additionally, foreign investors can take advantage of low interest rates, making borrowing more feasible and reinforcing real estate as a reliable hedge during these uncertain times.10 Canadian real estate continues to be especially appealing to investors seeking to mitigate currency risk by investing in a tangible asset.10

Canadian to USD Currency Exchange

Source: Bank of Canada, Peakhill Capital

United States 

The combination of high mortgage rates, persistent inflation, tariffs, and geopolitical uncertainty has put continued pressure on housing affordability. As a result, the U.S. renter demographic, a younger 20-34 cohort, has continued to generate demand for traditional multi-family, as home prices remain unaffordable.11 “We believe that significant pent-up rental demand, as a result of an estimated supply shortage of 3 to 4 million housing units, underpins our thesis of delivering high-quality multi-family assets in the supply-constrained U.S. markets.” noted Jonah Belkin, President of Peakhill Equity Partners.

Housing Prices

Canada 

The 25% tariffs on steel and aluminum are expected to increase construction costs nationwide, which will reduce developers’ incentive to build. Both steel and aluminum are exports averaging around $1 billion per month with the majority of steel coming from Ontario and aluminum from Quebec.12 The U.S. accounts for 90% of steel and aluminum imports with RBC forecasting these tariffs to have a $24 billion impact on these Canadian exports.13 If such tariffs persist, housing prices are expected to rise nationwide in response to inflationary pressure on construction labour and material costs despite the housing supply increase. 

December 2024 Canadian Steel Exports

Source: Canada Border Services Agency, Peakhill Capital

United States 

Prices continue to trend upward as median sales house prices rose 2.4% from Q4 2023 to Q4 2024.14 Relying on Canada as its primary trade partner for steel and aluminum, it is unclear how much capacity the U.S. has available to manufacture these inputs domestically as Canadian imports are expected to decline in response to tariffs.13 According to the National Association of Home Builders, tariffs on input materials from Canada could increase the cost of imported steel and aluminum by several billion dollars.15 These steep price hikes on new developments are likely to slow investor demand in the short run and lend to limited supply in the future, which may put upward pressure on property values.

Average Sales Price of Houses Sold in the U.S.*

*Not seasonally adjusted, reported in USD 

Source: Federal Reserve, Peakhill Capital

Key Insights for Canada 

  • Home sales have declined despite supply increases as consumers remain cautious in the face of an uncertain economic outlook.
  • Interest rates are expected to trend downward which reduces borrowing costs for consumers and helps to stimulate demand.
  • Foreign investors may be incentivized to invest in Canada if CAD depreciates.
  • Due to rising construction costs, new developments are expected to slow, which may increase property values in the long run.

Key Insights for U.S. 

  • Consumer confidence remains low as new home sales dropped 10.5% in January as mortgage rates and prices remain high, further shifting the demand towards rental housing.
  • Interest rates remain stagnant as the Federal Reserve looks to inflation changes before introducing further cuts.
  • Supply shortages are driving demand for multi-family assets, as high mortgage rates, ongoing inflation, tariffs, and geopolitical uncertainty continue to restrict housing affordability.
  • Due to rising construction costs, new developments are expected to slow, which may increase property values in the long run.

“In the aftermath of President Trump’s tariffs announcement, Canada has been attempting to craft an appropriate response to limit the economic disruption.  Retaliatory tariffs have been imposed, affected industries have received financial support, interest rates have been cut and initiatives like ‘Buy Canada’ have gained momentum. While this approach may provide short-term relief, a prolonged trade war with the U.S. is ultimately a futile exercise. As opposed to relying on short-term strategies to resolve immediate disruptions, Canada should focus on the long run to strengthen the economy, grow GDP, and position itself as an indispensable trade partner on the global stage. 

To limit our economic vulnerability from future trade wars and secure a stronger position in the global economy, we must focus on innovating, investing in people and diversifying trade. In doing so, Canada can not only survive turbulent times but thrive as a more resilient and competitive player on the world stage. Therefore, if Canada can recognize these opportunities and shift policy towards a long-run strategy in the face of this trade war, then perhaps this wake-up call is exactly what this trade war is good for.”

Chaim Karpel—Vice President, Institutional Sales

Note from Peakhill 

As a leading asset manager with both commercial real estate and equity platforms throughout North America, Peakhill Capital strives to seek new opportunities for investors and developers in the face of economic uncertainty.

Our Peakhill Capital credit strategy is focused on originating, underwriting and servicing commercial mortgages for institutional investors, investment managers, developers, and borrowers across North America. Peakhill strives to create more affordable housing opportunities and understands the concerns of developers and investors amidst changing market conditions. Through our Canadian lending arm, Peakhill Capital has grown to be one of the largest CMHC Insured lenders. Our U.S. lending arm is focused on U.S. multi-family investments, primarily financed with Fannie Mae and Freddie Mac first mortgages. Peakhill Equity Partners is an opportunistic equity platform focused on Co-General Partner (“Co-GP”) and Priority Equity investments in ground-up and value-add real estate projects in the United States and Canada. Through our tailored financing and investment solutions, we partner with clients to drive growth.

Please note: The information provided in this article was last updated on March 18, 2025. Any policy changes made after this date are not reflected in the material.

Footnotes

  1. Department of Finance Canada. (n.d.). Canada’s response to U.S. tariffs. Government of Canada. https://www.canada.ca/en/department-finance/programs/international-trade-finance-policy/canadas-response-us-tariffs.html ↩︎
  2. Canadian Real Estate Association. (2025, February 18). Fourth-quarter housing data hints at home sales rebound for 2025. Canadian Real Estate Association. https://www.crea.ca/media-hub/news/fourth-quarter-housing-data-hints-at-home-sales-rebound-for-2025-2/ ↩︎
  3. Reuters. (2025, February 25). U.S. consumer confidence deteriorates sharply in February. Reuters. https://www.reuters.com/markets/us/us-consumer-confidence-deteriorates-sharply-february-2025-02-25/ ↩︎
  4. Reuters. (2025, February 26). U.S. new home sales fall sharply in January. Reuters. https://www.reuters.com/markets/us/us-new-home-sales-fall-sharply-january-2025-02-26/ ↩︎
  5. Royal Bank of Canada. (2025, February 11). Canada’s housing market outlook: Sustaining recovery in uncertain times. RBC. https://thoughtleadership.rbc.com/canadas-housing-market-outlook-sustaining-recovery-in-uncertain-times/ 2025, https://thoughtleadership.rbc.com/canadas-housing-market-outlook-sustaining-recovery-in-uncertain-times/. ↩︎
  6. Bank of Canada. (2025, February 27). Staff analytical note 2025-2. Bank of Canada. https://www.bankofcanada.ca/2025/02/staff-analytical-note-2025-2/ ↩︎
  7. Canadian Mortgage Trends. (2025, February 26). BMO forecasts 1.50% BoC rate by year-end if U.S. imposes tariffs on Canada. Canadian Mortgage Trends. https://www.canadianmortgagetrends.com/2025/02/bmo-forecasts-1-50-boc-rate-by-year-end-if-u-s-imposes-tariffs-on-canada/ ↩︎
  8. Federal Reserve. (n.d.). Economy at a glance: Policy rate. Federal Reserve. https://www.federalreserve.gov/economy-at-a-glance-policy-rate.htm ↩︎
  9. Bank of Canada. (n.d.). Daily exchange rates lookup. Bank of Canada. https://www.bankofcanada.ca/rates/exchange/daily-exchange-rates-lookup ↩︎
  10. RE/MAX. (2025, February 10). How Canadian real estate acts as a currency hedge in a weakening dollar environment. RE/MAX. https://www.remaxwealth.com/insights/how-canadian-real-estate-acts-as-a-currency-hedge-in-a-weakening-dollar-environment ↩︎
  11. Hines. (n.d.). North American living sector. Hines. https://www.hines.com/global-living-reimagined/north-american-living-sector ↩︎
  12. CBC News. (2025, February 20). Canada-U.S. steel and aluminum trade charts. CBC News. https://www.cbc.ca/news/canada/canada-us-steel-aluminum-trade-charts-1.7458568 ↩︎
  13. Royal Bank of Canada. (n.d.). How U.S. steel and aluminum tariffs would impact Canada’s economy. RBC. http://thoughtleadership.rbc.com/how-u-s-steel-and-aluminum-tariffs-would-impact-canadas-economy/#:~:text=Canada%20is%20the%20largest%20U.S.,and%2050%25%20of%20aluminum%20imports ↩︎
  14. Federal Reserve Bank of St. Louis. (n.d.). ASPUS: All sectors: U.S. corporate profits after tax with inventory valuation adjustment. FRED, Federal Reserve Bank of St. Louis. https://fred.stlouisfed.org/series/ASPUSry Employees: Manufacturing.” Federal Reserve Bank of St. Louis, 2025, https://fred.stlouisfed.org/series/ASPUS ↩︎
  15. National Association of Home Builders. (2025, February 12). Trump tariffs will drive up housing costs. National Association of Home Builders. https://www.nahb.org/blog/2025/02/trump-tariffs-will-drive-up-housing-costs#:~:text=The%20new%20tariffs%20on%20steel,single%2Dfamily%20and%20multifamily%20projects ↩︎
Back to All News and Insights

Share This Article:

Read our 2024 Annual Report Today!

View Now

Read our 2024 Annual Report Today!

View Now