New Section 338 levies raise the stakes. Now comes the harder question about rates
A fresh wave of US tariffs has arrived, and for Canada's mortgage market, the pressing question is whether the Bank of Canada (BoC) will respond.
Section 338 levies, carrying a 50% rate on approximately 5% of Canadian exports to the United States, officially took effect after Ottawa and Washington failed to reach a last-minute deal.
The measures stack atop existing tariffs on steel, aluminum, lumber, and motor vehicles, mechanically lifting Canada's average effective tariff rate to approximately 6% from around 3%.
That still places Canada below the approximate 7% average US tariff on imports from all countries — but the shift is meaningful, and it arrives against a housing market already subdued by 18 months of trade uncertainty.
Who bears the brunt
The hardest-hit sectors under the new regime, according to RBC Economics, are plastic products, electrical machinery, furniture, and wood products.
Regionally, the economic impact falls heaviest on Quebec, British Columbia, and Ontario. Canada accounts for approximately 3.7% of total US imports of the targeted products, while the US absorbs 81% of Canada's exports in those same categories, leaving Canadian exporters with substantially fewer alternative markets than their American counterparts.
The Canadian value-added content of the newly tariffed goods amounts to approximately 0.4% of gross domestic product (GDP), RBC Economics estimated.
In aggregate, more than 80% of Canadian exports continue to move duty-free under the Canada–United States–Mexico Agreement (CUSMA).
One nuance worth flagging: Canada is actually a net importer from the US in the Section 338 product list, bringing in roughly US$23 billion of those goods in 2025 versus approximately US$20 billion in exports, RBC Economics noted.
That dynamic creates some theoretical room for trade reorientation within North America, though deeply integrated supply chains make any rapid pivot unlikely.
Canada could lose 102,000 jobs and $271 billion in GDP by 2035 if CUSMA collapses, according to new Oxford Economics analysis commissioned by the Canadian American Business Council.https://t.co/jGKSbavOX0
— Canadian Mortgage Professional Magazine (@CMPmagazine) August 14, 2026
The Bank of Canada calculus
RBC Economics stopped well short of predicting a rate cut in response to the new tariffs. Tariff headwinds remain narrowly concentrated in a limited number of sectors, and targeted fiscal support, not blanket monetary easing, is better suited to cushion affected industries, the analysis argued.
Government assistance is widely expected to accompany the latest round of measures.
Where the calculus has shifted is on the rate-hike side. RBC Economics said intensifying trade uncertainty, combined with a recent moderation in underlying inflation, stripping out energy products, has raised the probability that the BoC will not raise rates in 2026.
The Bank has held its overnight rate at 2.25% since October 2025, and brokers tracking Canada's tariff-clouded Bank of Canada rate outlook for the remainder of the year should plan for a prolonged hold.
Negotiations between Ottawa and Washington reportedly broke off before the new tariffs took effect, leaving Canada's trade landscape in a prolonged state of uncertainty with no resolution clearly in sight.
Canada has signalled retaliatory measures but had not confirmed specifics at time of writing. With CUSMA's broader protections still in place, the worst-case scenario remains at bay. However, for brokers advising clients on rate timing, the margin between a hold and a cut is narrowing with every tariff escalation.
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