Just when it looked like the Bank of Canada could spend the rest of the year sitting on the sidelines, another twist has arrived.

The Bank Says Inflation Is Improving—So Why Does Edmonton Still Feel Broke?The latest tariff threats from the United States have reminded economists just how quickly the outlook can change. While the headlines are about international trade, the consequences could eventually affect Canadian interest rates, mortgage pricing, and the broader economy.

If you’re buying a home, renewing your mortgage, or wondering whether rates are headed lower again, here’s what I’m watching.

Tariffs don’t just affect trade

When most people hear the word “tariff,” they think about imported products becoming more expensive. That’s true, but the bigger issue is uncertainty.

Businesses delay investments. Manufacturers hold off on hiring. Companies rethink supply chains. Consumers become more cautious. Those effects can slow economic growth long before the tariffs themselves have their full impact.

The latest U.S. proposal would affect roughly $28 billion worth of Canadian exports across industries including lumber, chemicals, electronics, plastics, dairy products, cement, and paper products, although several major sectors remain exempt.

Why this matters for interest rates

Only a couple of weeks ago, most economists—including me—expected the Bank of Canada to remain on hold for quite some time. Inflation has eased considerably from its peak, but energy prices remain elevated and the Bank has repeatedly said it wants more evidence before making another move.

Now economists are beginning to discuss a different possibility.

BMO says worsening trade tensions could reopen the door to future Bank of Canada rate cuts if tariffs meaningfully weaken the Canadian economy. Their base case is still for rates to remain unchanged for now, but the risk has shifted.

That’s an important distinction. Nobody is predicting immediate rate cuts because of tariffs. They’re saying tariffs increase the odds that cuts become necessary later if economic growth slows enough.

Capital Economics sees a more complicated picture

One point that stood out to me from Capital Economics is that Canada isn’t facing this challenge as one united economy. Some provinces depend far more heavily on exports to the United States than others, meaning the economic impact could vary significantly across the country. Provinces with larger manufacturing and export sectors may feel more pressure than those whose economies are supported by other industries.

That creates an unusually uneven outlook where parts of Canada could slow much faster than others, making the Bank of Canada’s job even more difficult. It has one interest rate for an economy that’s increasingly moving in different directions.

What does this mean for mortgage rates?

It’s tempting to think tariffs automatically mean lower mortgage rates. Unfortunately, it isn’t that simple.

Variable-rate mortgages are influenced by the Bank of Canada’s overnight rate. If the economy weakens enough because of tariffs, that could eventually support lower variable rates.

Fixed mortgage rates are different. They follow Government of Canada bond yields, which respond to investors’ expectations about inflation, growth, government borrowing, and financial markets. Some days tariffs push bond yields lower because investors expect slower growth. Other days they push yields higher because markets worry about inflation or increased government spending. That’s why we’ve seen fixed rates move both up and down during the various rounds of tariff announcements over the past two years.

What should buyers and homeowners do?

I don’t think this is a reason to rush into making a mortgage decision—or to delay one. What it does reinforce is the importance of having a strategy rather than trying to guess what politicians or central bankers will do next.

If you’re renewing in the coming months, now is a good time to review your options rather than waiting until the last minute. If you’re buying your first home, remember that mortgage decisions should be based on what you can comfortably afford today—not on where you hope rates might be six months from now.

Mortgage Broker Advice

The biggest story isn’t necessarily the tariffs themselves. It’s the uncertainty they create.

Only a few weeks ago the conversation was about inflation staying a little too high. Now economists are once again discussing the possibility that slowing growth could eventually lead to lower interest rates. That’s how quickly economic forecasts can change.

If you’re wondering how these developments could affect your mortgage plans, I’d be happy to walk through your options and explain what today’s market means for your specific situation. Contact me for a free personalized consultation.