How Trump’s Tariff Threats Are Driving Mortgage Market Uncertainty in Canada

The return of Trump-era tariff threats is creating fresh turbulence in financial markets. Canadian bond yields are once again being pulled by global trade headlines, adding pressure on the Bank of Canada’s rate decisions. The result? A renewed wave of uncertainty for homebuyers, lenders, and anyone navigating the mortgage landscape.

Trade Tensions Are No Longer Just Political—They’re Personal

If you’re a homeowner in Canada or planning to buy a home soon, global politics might feel like something happening “over there.” But thanks to recent tariff threats from the U.S.—particularly from former President Donald Trump—Canadian borrowers are suddenly feeling the pressure a lot closer to home.
Tariff policy is no longer just a trade issue—it’s now directly tied to what mortgage rate you might be offered, whether fixed or variable.
So what’s really going on? And how should Canadian mortgage holders react?

Let’s unpack what Trump’s proposed tariffs mean for interest rates, the housing market, and the uncertainty borrowers are facing heading into the second half of 2025.

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BoC Is Playing It Cautious as Global Storm Clouds Gather

The Bank of Canada recently cut its policy rate to 3%, reflecting cooling inflation and early signs of life in Canada’s housing market. While that move was expected, Trump’s re-escalation of tariff threats has complicated the story.

Key signals from the BoC reveal just how cautiously they’re approaching 2025:

• Quantitative tightening is over, which typically helps bring bond yields down
• Inflation expectations are stabilizing, giving the Bank more wiggle room
• The loonie has only dropped slightly (~1%) even with rate divergence from the U.S.
• But most importantly: tariffs are now flagged as a “major uncertainty” that could push up prices while dragging down GDP

The Bank is now walking a tightrope—stimulate the economy with more cuts, or protect against possible tariff-fueled inflation?

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Will Mortgage Lenders Follow the Bond Market? Maybe Not.

In a typical environment, falling bond yields = lower fixed mortgage rates. That’s because lenders can fund mortgages more cheaply, and they pass some of that on to borrowers.
But in times of uncertainty, lenders get cautious.
Just like in 2014 (post-oil crash) and 2015 (post-BoC rate cuts), lenders might not pass the full savings along. Here’s why:

• They factor in risk premiums to protect themselves against volatile markets
• Lender funding costs rise if international confidence in Canadian assets declines
• When economic data is unpredictable, mortgage pricing becomes more conservative

In other words, even if the BoC cuts rates again, don’t expect all lenders to match it 1:1.

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Could the BoC Cut Rates Even Further? Yes. But There’s a Catch.

If Trump’s tariff agenda accelerates into a full-blown trade war, economic growth could slow fast—and that might push the BoC to slash rates even further. Some economists are already predicting a potential 1.5% policy rate by 2026.
But here’s the catch: tariffs could also drive inflation.

If Canadian businesses have to pay more for U.S. imports, they’ll pass those costs on to consumers. That kind of imported inflation puts the BoC in a tough spot:

• Cut rates to support growth, but risk rising inflation
• Keep rates steady to fight inflation, but choke the economy

Either way, mortgage rates could be pulled in opposing directions, leaving borrowers with a difficult decision: fixed or variable?

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How Trump’s Tariffs Are Creating a Confidence Crisis

Trump’s new tariff proposals include:

• A 25% tariff on most Canadian imports, with
• A 10% tariff on Canadian energy products (despite the U.S. being heavily dependent on our oil & gas)

This goes directly against the USMCA trade deal that Trump himself negotiated, signalling that political strategy is now being prioritized over economic logic.
The result? A massive wave of uncertainty, not just for Canada but for all U.S. trading partners. Throw in wild claims about drug smuggling, border crises, and vague hints at “annexation,” and it’s no wonder economists are calling this the most unpredictable trade environment in decades.

And when global markets get jittery, mortgage lenders become more cautious. Risk premiums rise. Portability and flexibility features get trimmed. And borrowers face tougher decisions.

Mortgage rates are shifting quickly under tariff pressure. Don’t miss our breakdown on what Canadian borrowers need to know about this new wave of rate volatility.

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The U.S. Might Not Be As Immune As It Thinks

While Canada stands to lose more in direct trade impact, the U.S. economy isn’t untouchable either. Here’s why:

• Tariff-driven inflation could worsen the cost-of-living crisis
• The stock market is vulnerable to any trade-triggered correction
• A massive federal deficit (6% of GDP) leaves less room to cushion a slowdown

That means financial volatility on both sides of the border could persist. And since U.S. economic shocks often ripple into Canadian markets, borrowers here will need to stay alert well into 2025 and beyond.

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Is There a Silver Lining for Canadian Borrowers?

Actually—yes.

One silver lining in this storm could be Canada’s chance to boost internal efficiency. Economists estimate that interprovincial trade barriers act like a 21% internal tariff—and breaking them down could help cushion the blow from U.S. tariffs.

By improving internal supply chains and reducing friction between provinces, Canada could reclaim some of the GDP lost to cross-border trade tensions.

BoC leaders have already called out domestic productivity as a national weakness. A crisis like this may be the push needed to finally address it—laying a stronger foundation for the long-term economy and, eventually, more stable mortgage conditions.

“If you’re feeling uneasy about where rates are heading, see how tariff turbulence is affecting Canadian borrowers.”

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Mortgage Holders: This Is Your Signal to Stay Vigilant

The bottom line? The BoC may cut rates again—but mortgage lenders may hesitate to follow.

If you’re a homeowner or prospective buyer in Canada, here’s what you should do now:

• Monitor interest rate forecasts closely—especially if you’re considering variable
• Evaluate your risk tolerance: Can you handle a few rate swings, or do you need payment stability?
• Consider locking in if you’re approaching a renewal and rates are at a short-term low
• Speak to a mortgage broker (not just your bank) for an unbiased strategy

Trump’s tariffs may be aimed at global trade—but their impact will be felt right here, in your mortgage rate.

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Mini Verdict: The Trade War Isn’t Just About Trucks and Timber—It’s About Your Mortgage

In today’s world, global politics can hit your wallet faster than you think. Trump’s tariff threats are creating waves across the housing and mortgage markets in Canada—forcing lenders, central banks, and borrowers to adapt in real-time.

If you’re unsure how to navigate this economic noise, remember: a clear mortgage strategy is your best defence.

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Why Choose Mortgage.Expert?

At Mortgage.Expert, we help Canadians cut through the confusion and get straight answers. Our tools, insights, and expert advice are tailored to your life—not just today’s market.

We work with trusted lending partners across Canada to find the right rate, the right features, and the right strategy for you—whether you’re buying, renewing, or refinancing.

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