As protectionism and trade war-fuelled trade action sweep the continent, one B.C. professor argues that the exact opposite is needed for the province’s housing market to thrive.
“I’m hoping that the … current U.S. tariffs are in place to gain leverage and actually negotiate all tariffs away,” said Andrey Pavlov, finance professor with Simon Fraser University’s Beedie School of Business.
“We need to move to a place, to really a world, with complete free trade.”
By reducing the cost and risk of real estate investment, trade liberalization could unleash capital and housing supply to improve the province’s affordability deficit. Political leaders aren’t thinking big enough, he said.
“The question is, are our leaders going to [embrace free trade]? They have made no indication that that’s their intent. Instead, they have gone down the path of very petty and bureaucratic responses that really do not matter for the U.S. They make no difference and do not help us with the trade war.”
With Canada gearing up for a national election on April 28, there is no shortage of proposals being tossed about.
The federal Liberals want to “get the federal government back into the business of homebuilding” as a builder and financier, according to their website. Meanwhile, the federal Conservatives have proposed cutting red tape and cutting taxes on capital gains reinvested in Canada.
Both parties have pledged to axe the GST on certain home purchases.
Thomas Davidoff, real estate finance professor with the University of British Columbia’s Sauder School of Business, said the next government’s top priority should be exorcising U.S. tariffs, even if it means targeting token American products like bourbon. While Canada was spared the worst treatment, it still faces sector-specific levies on lumber, steel, aluminum, autos and energy.
“I do think that probably requires pain in the U.S. so that there’s political pressure to undo the tariffs, and so I think you have to walk a line,” he said.
“It would be nice to see a global united front of strong tariffs on American exports and particularly tech production if that’s possible, because the U.S. is a big services producer. To the extent the world can inflict pain on the U.S. politically, … I think that’s probably an important step.”
New government, new fiscal policies
Domestically, the next government may focus on fiscal policy measures including economic stimulus. This could take the form of more infrastructure spending, as well as higher transfers to unemployed Canadians “so that we don’t get into too nasty of a recession,” Davidoff said.
Bank bailouts aren’t out of the question either, especially if mortgage loan defaults soar in Ontario, he said.
Andrew Lis, director of economics and data analytics with Greater Vancouver Realtors, said there’s a surprising degree of similarity between the main political parties.
“Interestingly, both the major contenders in the federal election at the moment, the Conservative Party [of Canada] and Liberal Party of Canada, actually seem to have fairly similar housing platforms at the moment, differing on approaches more than necessarily the full substance,” he said.
One difference, Lis said, is that the Liberals would bring a greater scale of government intervention into real estate markets. Though neither party has a silver bullet, such programs may be able to accelerate housing assistance for lower-income Canadians, he said.
“The reality of the situation that we find ourselves in, particularly in somewhere like Metro Vancouver or Toronto where prices are high, is that an approach that focuses purely on adding market supply is one that will take many, many years to see the benefits.”
He continued: “An approach that involves some government spending is an approach that I think is welcome, in the sense that there’s lots of people who are struggling with affordability at the lowest income brackets …, and those kinds of government programs can very quickly bring housing online in some cases.”
Brendon Ogmundson, chief economist with the British Columbia Real Estate Association, said unsold new inventory is at its highest level in about a decade. Dropping the GST for certain homebuyers could stimulate demand and absorb accumulated inventory.
Other ideas being floated include providing infrastructure financing to municipalities so they can lower stifling development charges; and jump-starting the prefabricated housing market by directing bulk orders and financing mass-timber and off-site construction methods.
“A lot of it is really positive in terms of getting more supply, which is really the goal,” Ogmundson said.
“In conjunction with what we’re seeing from the provincial government in B.C. on the supply side, all of those point to some real progress on the housing front compared to what we’ve seen in the past, which was all about reducing demand or rationing demand through different taxes and regulations.”
U.S. to remain Canada’s significant other?
The trade conflict could see a decoupling of the U.S. and Canadian economies and prompt a realignment of global trading relationships and alliances. Still, Ogmundson said the two North American countries will always be joined at the hip.
“It’s really hard to ignore a $30 trillion market that’s right next door. So it’s great if we form other trade agreements with other countries, but you can’t ignore a market that size,” he said.
Meanwhile, monetary policy is another unknown. Some experts told BIV there is room for interest rates to go lower, since tariffs have limited inflationary implications and the economy is not overheated. Other experts disagreed, saying rates will be sticky amid uncertainty, higher import prices and the risk of stagflation.
With significant volatility in the wake of President Trump’s “Liberation Day” tariffs unveiled on April 2, equity and forex markets are also worth watching, said UBC’s Davidoff. A stronger loonie could tolerate further monetary easing.
The Canada-United States-Mexico Agreement (CUSMA) protected Canada from the worst of the Liberation Day tariffs, said Jock Finlayson, chief economist with the Independent Contractors and Businesses Association.
“That is good news, and it suggests we are gaining benefits from being part of the CUSMA,” he said. “Most Canadian exporters that do the required paperwork, as spelled out in CUSMA, will continue to be able to sell into the U.S. market, tariff-free.”
Finlayson said in addition to eschewing retaliatory tariffs and tariffs on “intermediate business inputs,” the next government should consider reviewing and revising CUSMA earlier than 2026, when a joint review is already planned.
“It is our interest to advance the discussions, as Ontario Premier Doug Ford has recommended,” he said.
Ultimately, SFU’s Pavlov said politicians will need to think bigger than tit-for-tat tariffs and other populist pitches.
“If the tariffs stay in place the way they are, and everyone digs in their heels and maybe some countries even increase tariffs further, then that’s obviously going to be terrible for the global economy. It may very well push the world into a global recession, and no one wants that,” he said.
Pavlov encouraged the formation of new free trade pacts, and suggested Canada should focus on eliminating barriers rather than erecting new ones.
“If Canada calls [its trading partners] and says, ‘Well, how about we set up a complete free trade agreement, no barriers, no checks, nothing like that?’ That phone call will be received well by the vast majority of countries. So there is room for Canada to go that route. That will leave us, at the end, in a great and very strong global position.”
