The potential impact of U.S. policies under a Trump presidency on Canada: What it might mean for your mortgage

With Donald Trump’s election win last month, all eyes are on the U.S. and what his policies might mean for the Canadian economy. 

While his victory may not seem directly connected to your mortgage, the reality is that U.S. policies often have a significant spillover effect on Canada, especially when it comes to interest rates, housing markets, and consumer costs. 

Let’s take a closer look at some of his key policy promises and the potential impact on mortgage rates and housing costs here in Canada:

Key U.S. policies and their potential impact on Canada

1. Tax cuts and economic growth
One of Trump’s signature moves was the implementation of major tax cuts aimed at stimulating U.S. economic growth. This created a surge in business investment and consumer spending south of the border. While this is a positive for the U.S. economy, Canada feels the effects too, particularly in terms of trade. As U.S. businesses expand, Canadian exporters often benefit from increased demand, but the flip side can be higher inflation, especially if demand for goods outpaces supply, putting pressure on Canadian consumers and households.

2. Trade tariffs and inflation
Trump’s “America First” approach previously led to tariffs on Chinese goods and other imports. While Canada was largely spared from direct tariffs, global trade shifts have disrupted supply chains, driving up costs for imported goods and fuelling inflation. Trump’s recent threat of a 25% tariff on all goods from Canada and Mexico could intensify these inflationary pressures. If inflation rises, the Bank of Canada may raise interest rates, increasing borrowing costs for Canadians.

3. Immigration and labour markets
Trump’s restrictive immigration policies have caused labour shortages in the U.S., which could impact Canada. With fewer workers in certain sectors, Canada’s labour market may become more attractive to U.S. companies, driving immigration and helping Canadian businesses fill vacancies. However, Trump’s recent promise to deport illegal immigrants could worsen these shortages, putting upward pressure on wages and contributing to inflation in Canada as demand for housing, services, and skilled labour rises.

4. The Federal Reserve and interest rates
Canada led the way in rate cuts this year, easing ahead of the U.S. Federal Reserve, but the future of Bank of Canada cuts depends on the Fed’s outlook. If the Fed continues easing, the BoC is likely to follow suit. However, persistent global inflation could lead to fewer rate cuts than currently anticipated in both the U.S. and Canada, impacting mortgage rates for Canadian homeowners.

The broader impact on Canadian mortgage borrowers

As the Bank of Canada’s rate decisions continue to be influenced by the Federal Reserve’s actions and global inflation, it’s crucial for homeowners to stay informed about how these changes may impact mortgage rates, especially with the upcoming wave of renewals. 

If you have questions about how the current rate environment affects your mortgage or are preparing for a renewal, reach out today. I’m here to help guide you through your options and ensure you make the best decisions for your financial future.