So as of yesterday, the U.S. has confirmed and is getting ready to roll out a 25% tariff on imports from Canada and Mexico, starting Saturday, February 1st, 2025. However President Trump is still deciding whether to include oil in these tariffs, saying the decision will depend on factors like oil prices and how both countries handle issues like illegal immigration and drug trafficking.
Canada is the largest supplier of crude oil to the United States. As of recent data:
- Daily Exports: Canada exports about 3.5 to 4.0 million barrels per day (bpd) of crude oil to the U.S.
- Percentage of U.S. Imports: Canadian oil accounts for approximately 50-60% of total U.S. crude oil imports.
- Overall U.S. Consumption: Canada supplies roughly 20-25% of the total crude oil consumed in the U.S.
Experts warn that if Canadian oil faces tariffs, U.S. consumers could see higher gas prices so inflation is another big concern—higher fuel costs could make things worse, so the U.S. might hold back to keep prices stable.
We can expect the BoC will likely take action to manage the economic impact. Here’s a few scenarios of what we can predict could happen:
- Likely BoC Response: The BoC might cut interest rates to encourage spending and investment. Even if they don’t drop rates right away, they could take a wait-and-see approach, holding off on hikes or hinting at future cuts. A weaker economy could also drag down the Canadian dollar, which would help exports but make imports more expensive.
- Alternative Responses (If Inflation Rises): If tariffs push costs up, especially for imported goods, inflation could start rising. In that case, the BoC might keep interest rates steady or raise them slightly to keep inflation in check. However, this would only happen if inflation increases more than expected, which might be less likely.
- Overall Prediction: The most probable scenario is a rate cut or a pause in hikes, especially if the tariffs hurt oil exports and economic growth. The BoC would likely monitor inflation closely, but its priority would be preventing a deep slowdown.
How can the Real Estate Market be Effected?
- If the BoC Cuts Interest Rates (to stimulate the economy): If the BoC cuts interest rates, buyers will have lower mortgage payments, making homes more affordable and sparking more demand. Sellers could see higher prices and quicker sales as more buyers compete for properties. Overall, a rate cut would likely boost the housing market, pushing prices up, especially in high-demand areas, and helping first-time buyers.
- If the BoC Raises Interest Rates (to combat inflation): If the BoC hikes interest rates to tackle inflation, buyers will face higher mortgage rates, making it harder to afford homes, slowing down demand. Sellers might reconsider listing there homes as prices may cool to get buyers interested and certain homes could sit on the market longer in less attractive communities. Overall, the housing market could slow down, with slower price growth or even price drops, particularly in expensive cities.
Conclusion:
Canadian real estate market will likely see mixed conditions. High interest rates could make affordability a challenge, especially in cities like Toronto and Vancouver, leading to slower sales and price stabilization and more interprovincial migration into Alberta as we have been experiencing in the past few years. Alberta, may continue to see positive growth with its strong ties to the oil and gas industry, we can expect to remain more resilient, benefiting from population growth and oil prices. Key factors like economic stability, regional demand, and the BoC’s policies will shape the market.
