What You Need to Know: U.S. Tariffs, Canadian Outlook and Cross-Border Impacts

Yesterday, I attended a virtual event hosted by RBC Bank featuring Salim Zanzana, Economist at RBC, who provided a timely and insightful economic update with a focus on the evolving relationship between the Canadian and U.S. economies. With new tariffs, shifting interest rates, and adjustments to immigration policy all in play, the session offered valuable perspective for Canadians navigating cross-border real estate decisions, refinancing opportunities, or broader investment planning. Understanding how macroeconomic trends, such as inflation, currency shifts, and trade disruptions, are likely to unfold over the coming months is essential to making informed decisions in today’s environment.

Here are some of the key takeaways from the presentation:

U.S. Tariffs and Trade Policy

The U.S. has introduced new tariffs, including 50 percent on steel and aluminum and 25 percent on non-US-compliant goods. While Canada benefits from CUSMA, trade policy uncertainty is impacting business investment and consumer sentiment.

Real Estate and Consumer Spending

Home sales are down in major Canadian markets, but consumer spending remains surprisingly strong, particularly in discretionary areas like restaurants and travel. Domestic tourism has picked up as Canadians pivot away from U.S. travel amid tariff concerns.

Currency Outlook

The Canadian dollar has shown recent strength and is expected to stabilize around 73 cents USD by year-end. Modest gains are projected into 2026, depending on rate differentials and fiscal policy developments in both countries.

Interest Rates and Inflation

The Bank of Canada has cut rates by 225 basis points and is holding at 2.75 percent. Inflation is under control in Canada, while the U.S. continues to face more persistent price pressures due to tariffs. The U.S. Federal Reserve is expected to begin rate cuts later this year.

Labor Market and Housing Affordability

Rapid population growth has strained job creation and housing affordability. The federal government’s recent decision to lower immigration targets is intended to ease pressure but could also slow long-term growth and reduce labor supply.

Overall Sentiment

Despite ongoing challenges, RBC’s outlook remains cautiously optimistic. With strong consumer demand, targeted fiscal support, and inflation trending toward target, the Canadian economy is positioned for a gradual, steady recovery.

If you’d like to talk further about how these insights may affect your cross-border plans or real estate decisions, I’d be happy to connect.