A Trump Presidency and Canada's Economy: What It Would Change

As of September 2024, with the US election still ahead, a second Trump presidency would reach Canadian households through four channels: a much larger defence bill, cheaper fossil fuel, lower American corporate taxes pulling companies south, and tariffs on imports. Every one of those lands on Canada's housing market through costs and interest rates.

This walkthrough follows an analysis by Tony Keller in The Globe and Mail. I am Moe Asgarian, a Toronto broker with RE/MAX, and I pay attention to American politics for one reason: it ends up inside my clients' mortgage payments. A note on timing. This was written in September 2024 and covers ground from early August 2024, when Kamala Harris had become the Democratic nominee, polls were moving toward a Trump win after the shooting at him, and nobody knew who would take the presidency in November.

Defence spending and the 2% NATO target

The first thing a Trump win changes is Canada's defence budget. The NATO commitment is that every member spends 2% of GDP on defence. As of 2024 Canada was running at roughly 1.5% of GDP, about half a percentage point short, and it was not the only NATO member spending less than it had agreed to. Trump made it clear in his first term that he takes this seriously, and the reasonable expectation as of September 2024 was that a second term would push members, Canada included, into actually allocating the money. For a government already running a deficit, finding that spending means finding revenue: raising taxes, or taking it from somewhere else. That is a change that reaches ordinary households, not just the defence department.

Cheaper fossil fuel, and what it does to Canada

The second channel is energy prices. Trump's policy direction as of the 2024 campaign was to strip the tax exemptions off green energy, which on balance makes fossil fuels cheaper. Gasoline and petroleum products get cheaper in the United States, Canada's largest trading partner, and Canada then sits under pressure to bring its own fossil energy prices down too. The complication is that Canada has spent years putting money into renewable energy. A sustained fall in fossil fuel prices does not leave those investments, or the plants built around them, untouched. Energy costs run through construction, materials and transport, so this is not a story that stops at the pump.

Corporate tax and the pull of moving a business south

The third channel is tax. In his earlier term Trump cut taxes on large businesses, which is a classic Republican position: take less from big companies and you get more economic activity. As of the 2024 campaign he intended to cut them again. The Canadian consequence is competitive. Canadian investors and Canadian companies look at a materially better tax situation across the border, and some of them move the business there. That forces the federal government and the provinces to revisit what they charge Canadian businesses, which is a slow change but a real one.

The border and a 10% tariff on everything

Two more changes are worth naming. The first is the border. Trump said repeatedly through the 2024 campaign that he would deport everyone living in the United States illegally, and the population being discussed was around 10 million people. Nobody knows how much of that is achievable, but any serious attempt lands directly on the Canada-US border, because some share of those people would decide to come north, and that arrival has economic consequences here. The second is trade. The stated plan as of the 2024 campaign was a 10% tariff on all imports into the United States, on every good. Republicans said more than once that Canada would be exempt. Maybe. It is not clear such a decision gets made at all, it is not clear an exemption survives contact with the policy, and in the meantime a very large share of both Canadian exports and Canadian imports runs through the United States. A change at that scale moves the Canadian economy in the short run and the long run.

How all of this reaches a Toronto mortgage payment

Set aside who wins. Every item on that list touches Canada's housing market, because housing sits downstream of almost everything else: imports, exports, corporate tax, the cost of industrial production, the cost of energy. The most direct line runs through rates. What a US president decides shapes what the Federal Reserve does, Federal Reserve policy shapes the rate environment in Canada, and the rate environment in Canada is the monthly payment on your mortgage. Translated into something you can feel, this is the question of whether your payment next year is a little smaller or a lot bigger. That is why a Toronto broker reads American campaign coverage, and why I expect to keep writing about it.

If you want to talk through what any of this means for a purchase, a sale or an investment you are weighing in the Toronto area, fill out the form at the bottom of this page or book a free consultation with me. Stay well and take care.