Well, we avoided talking about politics for a whole month, but this month we are back at it! The US & China tariff announcement(s) and haphazard implementation are causing turmoil and anxiety in the financial markets and around kitchen tables across our great Country (the undisputed champions of Hockey, we might add). With on-again, off-again dates, changing demands, reductions, and talk of a deal or compromise it is no wonder that confusion reigns. Canada isn’t well positioned for a trade war. We haven’t exactly fostered an environment that nurtures business growth. We have a swollen bureaucracy, stifling regulatory environment, high tax rates, and record deficits provincially and federally. There are 13 different sets of provincial and territorial rules in this country – there should be one (ou deux, pardonnez-moi), and lord knows how many different city building codes, municipal rules and obscure taxes that we contend with. Regulations equal bureaucracy, higher taxes, less capital availability and less money in your pocket.
We are responsible for not having our house in order, not Mr. Trump. We just got caught swimming without a bathing suit and the tide is out, way out. Hopefully, this serves as a wake up call to those in charge. We don’t need the competition of “whose tariff is bigger” between Ford and Trump – but thoughtful leadership municipally, provincially and federally.
“And so, my fellow Canadians, ask not what your country can do for you—ask what you can do for your country.” Or maybe the Joe Canada Molson Canadian soliloquy is more appropriate.
The good news is that the solution to getting our financial house in order can be Made in Canada. We need to make Canada the economic powerhouse it once was. With all this tariff nonsense, we have seen early signs of strong Canadian leadership – leadership focused on growth and promotion of Canada. Also a realization that we have been over reliant on the big bald eagle down south. If we need a silver lining, this could be it.
Impact on Mortgage Rates
The Bank of Canada cut its Prime rate by another 0.25% primarily based on the trade war and the impact this will have on the Canadian economy. Most of Canada’s recent economic news has been good prior to February. Gross Domestic Product was strong in the fourth quarter, with a 2.6% annualized increase in the value of all goods and services produced by the economy. Some 76,000 jobs were added in January alone. The unemployment rate is down to 6.6%. While the Bank offered that economic growth came in stronger than it expected, the pervasive uncertainty created by continuously changing US tariff threats is restraining consumers’ spending intentions and businesses’ plans to hire and invest. Against this background, and with inflation close to the 2% target, the Bank decided to reduce its policy rate by 25 basis points.
Fixed rates are also trending downward, giving relief to new buyers and those with mortgages renewing. We expect rates to continue to drop as the trade war continues. We’ll be focused on what happens in the run up to the next tariff deadline of April 2nd and the next Bank of Canada meeting April 16th.
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