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Tariffs and the BC Housing Market

Blog by Diane Cardoso | February 5th, 2025

Tariffs and the BC Housing Market:
The spectre of tariffs looms large over the intertwined economies of Canada and the United States, threatening not only the macroeconomic stability of both nations but also the livelihoods of ordinary citizens and the vitality of essential industries. Canada, with its trade-heavy economic model, is particularly vulnerable to such disruptions as scenarios outlined herein starkly illustrate. Whether under unilateral US tariffs or the more perilous prospect of retaliatory measures, the ramifications are unequivocal: diminished output, volatile inflation, and a testing of the Bank of Canada's monetary resolve.
British Columbia, with its relatively diversified trade portfolio, may weather the storm better than other provinces more reliant on US markets. However, the scars left on the province's forestry sector by earlier trade skirmishes serve as a sobering reminder that even partial insulation offers limited reprieve. For the housing market, the stakes are equally high. A recession-induced drop in activity might be mitigated by central bank intervention, but the possibility of persistent inflation could keep mortgage rates uncomfortably high, stifling the recovery.

The most likely scenario, assuming US tariffs are levied, involves a limited and targeted set of tariffs on US imports, which would result in limited inflation impact and allow the Bank of Canada to respond to any severe injury to the economy. While a 10 per cent tariff would have only minor negative impacts for the housing market, a 25 per cent tariff, with no or limited retaliation, would generate a familiar pattern of temporary declining activity that gives way to strong market activity as plummeting mortgage rates unleash pent-up demand.

Courtesy:  Brendon Ogmundson, Chief Economist BCREA