Greetings,
I hope you are well. This email attempts to unpack the resulting uncertainty surrounding the imposition of tariffs between the US and Canada, and the potential ramifications to the BC Housing Market.
Summary of Findings:
According the the BCREA's Chief Economist, Brendon Ogmundson, "Our model estimates that a 25 per cent tariff would cause a
0.75 per cent to 1.1 per cent contraction in BC’s real GDP in
the first year of the tariff, followed by slow but positive
growth the next year".
- A tariff on all Canadian imports to the United States would have serious consequences for the Canadian and BC economies.
- A 25 per cent tariff would push both the Canadian and BC economies into recession, and the impact could be compounded by a broader trade war and retaliatory tariffs by Canada.
- Under the most likely scenario, the BC housing market would see a temporary decline in activity before posting a robust recovery as mortgage rates decline substantially, thereby unleashing pent-up demand.
- If a two-way 25 per cent Canadian-US retaliatory tariff framework was instituted, according to Brendon Ogmundson, "this would likely cripple real GDP, causing a peak 5.5 per cent drop in Canadian output compared to the baseline... Accordingly, much higher prices for imported consumer goods and business inputs would push inflation back above 5 per cent, undoing the Bank’s progress over the past year. As a result, the Bank would be forced to change course, temporarily raising its policy rate back to a peak of 4 per cent.
- Mortgage rates could go as high as 6.25% in a full out retaliatory tariff situation or as low as 2.5% if there is no retaliation.
Source: (BCREA)
Click here to review a timeline of the tariffs. (Source: CBC)
As always, please feel free to contact me with any questions about the aforesaid indexed items or the current real estate market conditions.
Best, Arran
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