By Jeremy Davis
Tariffs and the threat of tariffs are looming large in economies around the world, but perhaps nowhere as much as in Canada.
Historically, Canada has had the most reciprocally prosperous and interconnected free trade relationship with the United States (U.S.) in the world. With roughly three quarters of Canada’s exports landing in the U.S., the challenge for Canada is to diversify its trading relationships while striving to become more resilient and competitive in an increasingly uncertain international economic environment.
When discussing real estate at the national level, we frequently highlight how markets are inherently local, and this principle is especially true for the Winnipeg Regional Real Estate Board’s market region. Unlike the turbulent real estate markets found in larger Canadian cities, Winnipeg’s market tends to be more insulated from national trends. This resilience is one of the reasons why our region remains one of the most affordable housing markets in Canada, with less dramatic price fluctuations than seen in major urban centres.
While Winnipeg’s real estate market isn’t immune to national economic forces, its impact is generally felt to a lesser degree than in other parts of the country. Factors like interest rates, inflation, housing supply, population growth and employment trends shape the market, as we’ve witnessed during the global pandemic. Despite initial disruptions caused by lockdowns, Winnipeg and surrounding areas saw some of the highest monthly MLS® sales ever recorded, demonstrating the adaptability of our local market in the face of global crises.
It is safe to say that the impact of the pandemic is now a tiny dot on the horizon in our collective rear view mirrors, but a new economic force has emerged which is having an equally large impact on financial markets around the world. The shifting landscape of international trade policies under the recently elected U.S. administration, particularly the imposition of tariffs and the looming threat of trade wars, is an emerging challenge that warrants close attention.
The tariff threat: A Canadian context
The economies of Canada and the U.S. have enjoyed the most robust and reciprocal free trade relationship in the world. Tariffs or the escalation of a trade war, without question, creates significant challenges for both countries. As a smaller economy tied with the U.S., Canada could experience unique and pronounced effects that include increased prices, supply chain disruptions, and increased costs of doing business.
At the end of May, the Winnipeg Chamber of Commerce hosted a keynote address by David Frum, a prominent U.S. political commentator and former speechwriter for President George W. Bush. Frum discussed the political climate in the U.S. and its potential consequences for Canada and the global economy.
Frum acknowledged that a trade war between Canada and the U.S. would bring economic pain to both sides, especially if prolonged. Yet, he also presented several strategic recommendations for Canada to mitigate the damage and bolster its position in the face of these challenges. His suggestions included:
1. Implementing export taxes Rather than imposing retaliatory tariffs, which would hurt Canadian consumers and businesses, Frum recommended that Canada consider export taxes. Such taxes would directly impact U.S. companies and consumers, shifting the burden of the economic fallout to them while protecting Canadian interests.
2. Attracting talent from the U.S. Frum proposed the creation of a fund aimed at enticing U.S. research and industry experts, particularly those facing challenges in their fields, to relocate to Canada. Given the long-standing trend of “brain drain” from Canada to the U.S., this could be a pivotal opportunity to reverse the flow of intellectual talent and enrich Canada’s own innovation and research landscape.
3. Strengthening ties with Mexico By further strengthening trade relations with Mexico through existing agreements such as the Canada-United States-Mexico Agreement (CUSMA) and the North American Free Trade Agreement (NAFTA), Canada could bolster its position in the region and diversify its trade relationships.
4. Investing in national defense Frum emphasized the need for Canada to contribute more heavily to North American defense, particularly in terms of advanced missile tracking and interception technologies. This would not only enhance national security but also strengthen Canada’s geopolitical position.
5. Removing interprovincial trade barriers Frum suggested that Canada remove the internal trade barriers that still exist between provinces. Streamlining interprovincial trade could have a meaningful impact on Canada's overall economic productivity.
Since the address by Frum, Canadian Prime Minister Mark Carney has strengthened strategic partnerships with governments in Europe, taken steps to increase funding of the Canadian Armed Forces to achieve NATO’s 2-percent target in 2025, and passed legislation to remove federal barriers to internal trade and labour mobility, and expedite nation-building projects.
The local impact: Winnipeg’s resilience amid national and global challenges
For Winnipeg, the potential ramifications of a U.S.-Canada trade war are likely to be somewhat mitigated by the region’s relative insulation from broader national trends. Winnipeg’s real estate market may experience direct effects — such as rising construction costs due to supply chain disruptions or slower economic growth leading to more cautious consumer behavior which, in turn, could cause consumers to become more cautious in the housing market. The relative affordability of the Winnipeg Regional Real Estate Board’s market region could provide a buffer compared to more globally exposed markets like Toronto or Vancouver.
Optimism amidst change
Despite the potential challenges, there is reason for optimism. The strategic recommendations proposed by Frum, combined with ongoing nation-building initiatives by the Government of Canada, could help position the country — Winnipeg included — on a path toward renewed growth and stability. Long-overdue investments in infrastructure, innovation, and intergovernmental collaboration have the potential to strengthen Canada’s economy and create new opportunities for prosperity.
In the long term, if Canada can successfully navigate the turbulent waters of international trade tensions, it could emerge as a more resilient, diversified, and competitive nation. For Winnipeg, a city that already benefits from its relative affordability and economic stability, this could mean continued growth and opportunity in both the real estate sector and beyond.
Jeremy Davis is the Winnipeg Regional Real Estate Board’s Director External Relations & Market Intelligence.