Trump’s tariffs could make you a lot of money—if you have the right mortgage strategy

Donald Trump’s proposed 25 % “reciprocal” tariffs would ripple into Canada through financial markets long before any goods clear customs, creating a two‑phase mortgage‑rate story for 2025‑26. Here’s what could unfold beginning in Q2 2025 and how you might benefit.

 How the shock travels north

1. Risk‑off bond rally. When trade tensions rise, global investors typically flee equities and pile into safe sovereign debt, including Government of Canada (GoC) bonds. Higher demand pushes five‑year GoC yields—and therefore five‑year fixed‑mortgage rates—lower.

2. Currency pressure. Tariffs shrink Canadian export revenues and redirect capital toward the United States, weakening the loonie and raising the Canadian‑dollar cost of imports.

3. Imported inflation. After tariffed inputs work through supply chains—usually 12‑18 months—consumer prices climb.

4. BoC balancing act. The Bank of Canada must weigh slower growth (which argues for rate cuts) against rising inflation (which argues for hikes).

 Because these forces do not hit at once, 2025 and 2026 will look very different for borrowers.

 2025 — Cheaper money, steadier housing

• Five‑year GoC yield falls 35‑60 bp. Lower yields push five‑year fixed rates down.

• Fixed‑rate mortgages decline modestly. Banks rarely pass through the full bond move, but borrowers should still see meaningful payment relief.

• BoC cuts at least twice. A softer growth outlook should give Governor Tiff Macklem room to lower the overnight rate, pulling variable‑rate mortgages (VRMs) and HELOCs down—welcome news for variable‑rate holders.

2026 — Inflation echo and rate rebound

• Tariff pass‑through lifts CPI by 0.6‑1.0 pp. Higher prices for appliances, building materials and food feed into inflation just as the loonie remains weak.

• Bond yields turn first. Traders anticipating policy shifts could add 20‑30 bp to the five‑year GoC yield, reversing about half of the 2025 rally; five‑year fixed rates would rise before variable rates do.

• VRMs climb but stay below 2024 peaks. Prime may increase in 2026, but forecasts suggest it will remain lower than the 2024 high‑water mark.

Cut to the chase—what should you do?

1. Assess your finances. For renewals or new financing, call our office so we can tailor advice to your situation.

2. Consider a short‑term variable rate. A 12‑month (or shorter) variable lets you benefit from expected BoC cuts in 2025.

3. Plan to lock in later in 2025. Choose a lender that allows you to convert to a three‑, four‑ or five‑year fixed term without hefty penalties before inflation pushes rates higher in 2026.

4. Remember the inflation effect. If you lock in at today’s dollars and inflation rises, the real cost of your fixed payments will fall over time.

This commentary reflects my personal analysis of current conditions in Canada and anticipated U.S. policy moves. It is not formal financial advice; please consult a licensed mortgage professional at Mortgages Lab before acting.

Tags: #Camilo Rodriguez #Mortgage Strategy #Reciprocal Tariffs #Government of Canada Bonds #Loonie #Inflation