Every time Donald Trump starts talking tariffs, the markets go on a rollercoaster ride. And for Canadians, that means one thing—bond yields drop, which puts downward pressure on fixed mortgage rates. Earlier this month, when Trump confirmed new tariffs on Canada and Mexico, Canadian bond yields took an immediate dive. Then, when he announced a 30-day pause, they rebounded—though only by about half the drop.
Despite all this tariff turbulence, Canada’s big six banks have mostly stuck to their original rate forecasts:
Projected Rate Cuts for 2025
|
BANK |
2025 |
TOTAL |
||||
| Last
Rpt. |
Mar 12 | Q2 | Q3 | Q4 | ||
| CIBC | Feb 11 | -0.25% | -0.50% | N/C | N/C | -0.75% |
| RBC | Jan | -0.25% | -0.50% | -0.25% | N/C | -1.00% |
| Scotia | Feb 10 | -0.25% | N/C | N/C | N/C | -0.25% |
| TD | Feb | -0.25% | -0.50% | N/C | N/C | -0.75% |
| BMO | Feb 21 | N/C | -0.25% | -0.25% | N/C | -0.50% |
| National Bank | Feb
|
-0.25% | -0.25% | -0.25% | N/C | -0.75% |
N/C = No change
In 2026, the only bank that’s forecasting any movement at all is National Bank, where they are expecting a 0.25% hike in Q4. While these are the current projections, they could change quickly if Trump follows through with his tariff threats.
The real question is: Does he understand the economic fallout?
Markets, Tariffs, and Trump’s Blind Spot
Trump seems to measure his success by the stock market. When he won the election back in November, markets surged on optimism. But since taking office on January 20th, the Nasdaq, for example, has dropped 2.43% as of the end of the trading day on February 25th. Not exactly the trajectory he wants. Every time he doubles down on tariffs, the stock market seems to tank. Yet, he doesn’t seem to connect the dots. At least not yet.
Inflation: A Political Problem
Another important issue for Trump is inflation, which seems to have gotten a bit out of control. I’m currently in Miami, and the prices here are jaw-dropping.
A 24-pack of bottled water? $8 to $10 USD.
A dozen eggs? $7 to $10 USD.
With the exchange rate hovering around 45% (once the banks take their cut), the prices become crazy for Canadians heading south. Not long ago, shopping in the U.S. was a steal. But that ship seems to have sailed.
If inflation keeps rising under his watch, it’s only going to hurt his re-election chances. That’s why slapping tariffs on Canada right now makes no sense. He claims Canada will foot the bill, but that’s simply false. The tariffs are paid by the American importer, and those costs get passed directly to American consumers.
Will Trump Back Off?
For all these reasons, I believe Trump’s tariff threats will either:
- Be lower than initially announced,
- Be short-lived, or
- Disappear entirely.
Time will tell, but if history is any indication, Trump’s economic strategy tends to be loud on threats, light on follow-through. We’ll find out soon enough.
My Final Thoughts
Trying to predict mortgage rates while Trump is in office is like trying to nail Jell-O to a wall—things can shift in an instant. One policy move, one surprise decision, and the outlook could change overnight. If tariffs go through, bond yields will likely drop, bringing fixed mortgage rates down. But don’t get too comfortable—these effects could be short-lived if markets adjust or Trump backtracks.
The only certainty?
Uncertainty.
Stay informed, stay flexible, and be ready for whatever comes next.
Won’t yeilds spike to attract bond buyers if our dollar tanks to 50 cents of so. Rates will have to increawe not decrease to fund our rising defeceit.
Thanks for the comment! If it were to get to that point, then yes. Right now, a rant from Trump about implementing tariffs has resulted in a bond market reaction to the downside. But what’s interesting is when he announced he’s pushing the tariffs out to March 2nd, the bond market didn’t have a big reaction. If the tariffs are implemented, then yes, I think the bond market, as well as the BoC rate will eventually rise. It’s expected to first fall, but I would expect them to start hiking sooner than originally expected.
Trump has no re-election in consideration, he simply cannot be president next round. So his tariff motive is purely uncorrelated to future election. Also let’s not forget that American importers can find cheaper alternative and avoid Canadians’ products all together, the only reason they stick to Canadians for now is the prices make sense to them.
The only alternative for Canada is avoid the current situation “all eggs in one basket”! We need to diversify our export destinations across wide range of markets. Since 2008 almost all major economists including the current BoC governor has been saying this but yet we have done almost nothing to diversify our economic partners.
Donald Trump is not just one spinoff case and won’t be repeated; he clearly shows he represent a majority of consituents in USA. Both Dem and Rep have realized his policies are of majority of Americans. I won’t be surprised if I see continuation of his various policies with even Demarcates future presidents.
You’re right, he doesn’t have to worry about getting elected again in 4 years. But he does need to worry about the primary elections which are in two years. 100% agree that diversification is important. It’s like putting together a stock portfolio where a single sector could tank at any given time. A diversified portfolio offers protection and the same concept applies here as well.
I think all politicians, Republican and Democrat, will do whatever they have to do to give them the highest chance of being re-elected. They will try to get away with whatever they think they can get away with.