Last Wednesday, U.S. President Trump announced new tariffs on imports from nearly every country on the planet. Even Heard Island—an uninhabited Australian territory known mostly for its penguins—made the list.
Economic analysts have struggled to decipher the logic behind these “reciprocal” tariffs. Many were sharply critical. The Economist dismissed Trump’s assertions as “flat-out nonsense,” labeled his methodology as “almost as random as taxing you on the number of vowels in your name,” and questioned whether he truly believed Americans would benefit from sewing their own running shoes.
When asked whether he would consider reducing some of the newly announced tariffs, President Trump said he’d be open to “phenomenal” offers.
Global Reactions and Economic Impacts
Countries most affected by the new tariffs will likely seek deals with the U.S., but their economic influence is limited. The more critical responses will come from the world’s largest economies: China, Europe, and India. These nations may take a wait-and-see approach, allowing the U.S. to feel the weight of its new policy direction.
In the meantime, expect the following trends:
- Stock markets: Likely to experience sell-offs
- Economic growth: Expected to slow
- Inflation: Anticipated to rise due to increased import costs
Federal Reserve Chair Jerome Powell has stated the tariffs are “significantly larger than expected,” and the economic fallout is expected to include “higher inflation and slower growth.” Financial expert John Mauldin also noted that interest rate cuts by the Fed offer only limited relief in response to this kind of economic shock.
Bond market reactions have already shifted. Investors have increased their bets on the number of rate cuts expected by the U.S. Federal Reserve this year—from two to three, with the first now forecast for June.
Canada’s Position in the Storm
Despite the global reach of the new tariffs, the impact on Canada was relatively mild:
| Factor | Details |
|---|---|
| New Tariffs on Canada | None announced |
| Export Protection | ~40% of Canadian exports to the U.S. are protected under CUSMA |
| Senate Support | U.S. Senate voted to block Trump’s Canadian tariffs (House unlikely) |
| State-level Support | Alaska State Senate passed resolution supporting Canadian sovereignty |
| Domestic Policy Discussion | Renewed focus on removing internal trade barriers (est. 25% equivalent) |
Despite global instability, the Canadian dollar (Loonie) has actually gained value against the U.S. dollar in recent weeks—a small but welcome surprise.
Mortgage Advice for This Economic Climate
Government of Canada bond yields fell sharply last week. While some of that drop was offset by widening credit spreads, there’s still room for fixed mortgage rates to decline further.
(Reminder: lenders tend to take the elevator when raising rates and the stairs when lowering them.)
Variable-rate discounts have narrowed due to increased risk premiums, but were stable last week.
Canadian Rate Forecast
- I expect the Bank of Canada to cut its policy rate by another 0.25% at its next meeting on April 16.
- More cuts could follow, especially given the softening economic data.
Canada lost 33,000 jobs in March, the first monthly drop in over three years. The TSX fell along with global markets. Although inflation has recently ticked up, the Bank of Canada may lean toward cutting more rather than less—echoing the philosophy that “a firefighter has never been criticized for using too much water.”
Market Expectations for BoC Rate Cuts
| Date | BoC Rate Cut Probability (April 16) | Expected Total Cuts in 2025 |
|---|---|---|
| Thursday | 33% | 0.50% |
| Friday | 50% | 0.75% |
The Bottom Line
While uncertainty reigns in global markets, there may be opportunities for Canadian borrowers. Fixed rates could fall further, and more Bank of Canada cuts may follow. It’s a good time to revisit your mortgage strategy—especially if you’re approaching renewal or planning a purchase.
If you’d like help weighing your options, reach out anytime.
