In what’s turning into an all-out trade war between Canada and Donald Trump’s mercurial White House, the latter’s threats to impose auto tariffs could wreak havoc in vulnerable housing markets.
According to TD Economics, it is estimated that the tariffs, if levied, could cause 160,000 net jobs to be lost north of the border.
“Unemployment is the single greatest influencer on the housing market,” said Ron Butler of Butler Mortgage. “Massive unemployment is devastating to a housing market—it’s as simple as that.”
It wouldn’t be the first time Trump has harmed the Canadian economy since becoming President of the United States, added Butler.
“Donald Trump is, so far, borderline destructive to this economy. It’s a two-edged sword. He’s very dangerous to our economy. He’s lost us a few jobs and dropped the dollar, but it’s going to keep interest rates down.
“There’s absolutely no rational thinking person who believes they understand the mind of Donald Trump. That has to be underlined at all times. No one—not his wife nor anyone in his own party—no one knows what he’s going to say in the morning when he starts Tweeting.”
The North American Free Trade Agreement negotiations are but one reason interest rates haven’t been hiked, and the budding trade war will almost certainly keep rates low for the time being, as Butler alluded to.
The TD forecast also expects imposed tariffs to trigger a nation-wide recession, but how dire would the impact on Canadian housing markets be?
“A hundred and sixty thousand jobs are a little less than 1% of the employed people in Canada,” said CanWise Financial’s President and Broker of Record James Laird. “It’s significant, certainly, and if we lost 1% of the labour force it would put downward pressure on housing.”
While not everybody would find employment again, it’s a safe bet that some, if not most, would—even in different industries. The recent turmoil in Alberta’s oil sector springs to mind, added Laird.
“We can look at Alberta, where a lot of jobs were lost in the oil sector a few years ago,” he said. “There was downward pressure on housing and the number of transactions slowed down as well, but I don’t think anyone categorizes that as a housing collapse. It was a housing downturn. I think if the tariffs happened it would be a housing downturn again.”
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