Canadian Mortgage Rates Poised to Drop Amid Escalating Trade War
Trudeau Accuses Trump of Economic Sabotage as Tariff Battle Intensifies
Canadian mortgage rates could see a sharp decline as a deepening trade war between Canada and the U.S. rattles financial markets. The ongoing dispute, fueled by U.S. President Donald Trump’s aggressive tariff policies, has triggered a sharp drop in bond yields and raised expectations of multiple Bank of Canada rate cuts in the coming months.
On Tuesday, five-year Government of Canada bond yields—often a leading indicator for fixed mortgage rates—fell to 2.63%, down from 2.87% in mid-February. Major Canadian banks, including RBC and BMO, now anticipate the Bank of Canada (BoC) may implement deeper rate cuts than previously expected.
In a strongly worded televised statement, Prime Minister Justin Trudeau accused Trump of deliberately trying to cripple the Canadian economy to pave the way for U.S. annexation.
“What he wants is to see a total collapse of the Canadian economy, because that will make it easier to annex us,” Trudeau said. “That’s never going to happen. We will never be the 51st state, but yeah, he can do damage to the Canadian economy, and he started this morning.”
Trump’s latest tariffs include a 25% levy on all Canadian goods and a 10% charge on Canadian energy exports. In response, Canada has implemented retaliatory measures, though Trump warned via Truth Social that any counteractions would be met with further U.S. tariff hikes.
Political Leaders React to Trump’s Trade War
The escalating situation has drawn responses from across Canada’s political spectrum. Conservative Party leader Pierre Poilievre vowed to defend Canada’s economy, while co-deputy leader Melissa Lantsman, speaking at the Mortgage Professionals Canada symposium, warned that Trump’s actions would have lasting consequences.
“We’re about to enter into what can only be described as a tariff war,” Lantsman said, criticizing Ottawa’s economic policies and regulatory hurdles that she believes weaken Canada’s ability to compete with the U.S.
Meanwhile, NDP leader Jagmeet Singh called for an emergency session of Parliament—prorogued since January—to unite political leaders against Trump’s trade measures.
Bank of Canada Expected to Respond with Aggressive Rate Cuts
Economists believe the Bank of Canada will be forced to adjust its policy in response to the economic uncertainty caused by the tariffs. RBC’s chief economist, Frances Donald, and assistant chief economist, Cynthia Leach, now predict the BoC will cut rates more aggressively than initially forecast.
“Without tariffs, we expected the BoC to gradually lower rates to 2.25%,” they stated. “Now, we anticipate deeper cuts as long as tariffs remain in play.”
BMO’s chief economist Doug Porter echoed this sentiment, suggesting the BoC could drop rates to 2% by July, implementing multiple quarter-point cuts in the coming months.
As the situation unfolds, fears of a Canadian recession are growing. RSM Canada economist Tu Nguyen warned that rising consumer prices, higher unemployment, and decreased spending could lead to an economic downturn. Former Bank of Canada governor Stephen Poloz has also cautioned about Canada’s underlying economic vulnerabilities.
However, there may be room for de-escalation. U.S. Commerce Secretary Howard Lutnick hinted on Tuesday afternoon that Trump might reconsider some of the measures against Canada and Mexico in the coming days.
For now, the impact of the trade war is being felt in financial markets, with mortgage rates likely to continue their downward trajectory as uncertainty looms.
This version keeps the critical information intact while making it more engaging and suitable for personal posting. Let me know if you’d like any tweaks!
Comments