Canada's real estate industry joined other business leaders in condemning United States tariffs that are set to take effect Tuesday as the country braced for a potential economic fallout.
The federal government and several provinces were quick to announce retaliatory measures as economists wondered if Canada's central bank will now move to lower rates at a faster pace after the order to impose by United States President Donald Trump.
Bank of Montreal economists said there is a high degree of uncertainty given the lack of historical precedent, noting Canada has never been in a broad-based trade war with its largest trading partner.
"There are a number of questions still outstanding, including the full scope of Canadian retaliation, and any subsequent U.S. escalation, and responses from businesses and fiscal and monetary policy. There is also the meaningful question of how long tariffs will last," said the bank, in an economic note. "The Bank of Canada's cut last week was partially viewed as a risk management move to guard against, well, this situation. Previously, we expected the Bank to cut two more times this year. Now, we're forecasting 25 basis point cuts at each meeting until October."
Michael Markidis, an analyst with Bank of Montreal who follows the Canadian REIT sector, said that while the tariff risk was priced in to some extent for publicly traded real estate companies, the effects could be steeper for those companies.
"Equity risk premiums could expand further if the trade war drags on and leads to a recession in Canada, in our view," he said in a note to investors.
Canada's federal government has announced $30 billion in goods imported from the United States will face a 25% tariff, the first phase of Canada’s response.
The government also indicated an intention to impose tariffs on an additional list of imported United States products valued at $125 billion. This second list will be made available in the coming days.
Cost concerns
Both moves come after the United States government announced a 25% tariff on most Canadian goods with oil and gas facing just a 10% tariff.
Prime Minister Justin Trudeau made a direct appeal to the American people, saying a tariff war will put jobs at risk both north and south of the border.
"They will raise costs for you," said Trudeau, who has previously announced he is resigning as Prime Minister, in a press conference. "It just doesn't have to be this way."
With Trudeau's government facing defeat in based on current polls and a federal election looming, the opposition Conservative Party of Canada also indicated strong support for the retaliatory tariffs.
Provincial governments have joined the trade war, with Canada's largest province banning American companies from any government contracts.
American wine, beer, spirits and seltzer were also being removed Tuesday from Ontario government stores, impacting $1 billion of annual sales. British Columbia has followed with similar restrictions on the sale of alcohol from the United States.
Trudeau encouraged Canadians to buy domestically made products and suggested they change summer vacation plans to not travel to the United States.
Canadians have reacted with anger to tariffs with the United States national anthem being booed at several hockey games across the country.
Stock market concerns
Jon Love, executive chair of KingSett Capital, with about $18 billion in assets including real estate under management, wondered if falling stock markets would send a message to the American leader.
"A trade war benefits no one, but Canada will not be cowed into submission," said Love in a LinkedIn post. "Deal with the real issues and get back to a cooperative approach to trade and tackle those issues behinds this unwarranted trade aggression."
Business leaders appeared generally united behind the Canadian government's actions.
"Tariffs will drastically increase the cost of everything for everyone: every day these tariffs are in place hurts families, communities, and businesses," said Candace Laing, president and CEO, Canadian Chamber of Commerce in a statement published online. "This decision makes no sense when the majority of Americans oppose tariffs, when it harms businesses and workers on both sides of the border, and when the U.S. stock market is signaling that there’s no appetite for disruption."
RBC Economics predicted in a statement that the tariff would cause a recession in Canada in an economy that is already struggling.
It also forecast that Canada's manufacturing sector would be hit the hardest and that the trade measures would also harm the United States economy.
Other trade relationships
Joseph Broccolini, vice president of Montreal-based Broccolini Construction, urged Canada to diversify its resource management.
"Time to build on our relationship with the rest of the world, build more pipelines to the ports in the way so we can export our oil and" liquid natural gas, he said in a LinkedIn post.
The Canadian Steel Producers Association described the tariffs as "deeply disappointing," in a statement.
“With $20 billion in annual steel trade between our nations, these tariffs will cause significant disruption and economic hardship in both Canada and the United States,” the group said.
The tariffs led National Bank Financial to modify its predicted 1.4% growth in Canada's economy in 2025 to 0.4% and from 1.5% to 0.9% for 2026, while noting that the tariffs would weaken exports and investment, consumer spending and lead to higher capital costs for Canadian businesses.
The bank also predicted higher unemployment rates than it originally forecast, from 7% to 7.4% in 2025 and from 6.7% in 2026 to 7.6%.
National Bank predicted that the tariffs would lead to two difficult years but described it as "a necessary adjustment to enhance Canada’s economic sovereignty."