Tag Archives: economy

Imposition of Tariff by Donald Trump Led to Trade War

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On February 1, 2025, President Donald Trump announced significant tariffs targeting Canada, Mexico, and China, citing concerns over illegal immigration and fentanyl smuggling. The U.S. will impose a 25% tariff on Canadian and Mexican imports, and a 10% tariff on Chinese goods, effective Tuesday. (reuters.com)

In response, Canada and Mexico have announced retaliatory tariffs on American goods. Canadian Prime Minister Justin Trudeau unveiled counter-tariffs affecting $155 billion worth of U.S. products, warning Americans of potential job losses and increased costs. Mexican President Claudia Sheinbaum also declared retaliatory measures, emphasizing the importance of cooperation over conflict. (pbs.org)

Economists and trade analysts have criticized these actions, predicting economic downturns, job losses, and higher costs for American households and businesses. Critics argue that the tariffs violate the U.S.-Mexico-Canada Agreement (USMCA) and risk destabilizing the integrated North American economies. (apnews.com)

President Trump acknowledged that Americans might experience “some pain” from these measures but asserted they were essential to “make America great again.” He emphasized the need to address economic emergencies like illegal immigration and fentanyl smuggling. (apnews.com)

Financial markets have reacted to these developments, with significant declines following the tariff announcements. Major companies, including Amazon, Google parent Alphabet, and Palantir Technologies, are expected to report earnings this week, which may further influence market dynamics. (investors.com)

The situation remains dynamic, with potential for further economic and political repercussions as the involved nations navigate this escalating trade conflict.

For a visual summary of these events, you might find the following video informative:

Sources

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Interest Hikes and Housing Bubble Burst

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Another reason for housing bubble or housing crisis is interest rate hikes. If interest rates are low, housing bubbles often get even bigger. At lower rates people can buy larger mortgages, increasing demand and driving up prices. Buyers may take out risky loans, ignoring warning signs like rising interest rates or a shrinking economy. And then there’s the herd mentality. People see big money being made in the real estate market and so do other people. A real estate shopping frenzy ensues. When people are in a bubble they think the market will never change! For example, when the Bank of Canada cut interest rates during Covid in 2020, house prices skyrocketed by May 2022.

When there is too much inflation and house prices are too high, it needs to be controlled to cool down inflation and the housing market. The Bank of Canada raised interest rates in July 2017 for the first time in seven years, slowing the housing market as Canada’s biggest banks raised interest rates. And, the biggest interest increase comes in 2023. The Bank of Canada raised interest rates by 100 basis points in 2023 to curb inflation, the largest increase since 1998. The governor of the Bank of Canada said the increase was necessary to prevent high inflation from stifling. The governor had said that the interest rate will be reduced to 2 percent. On the other hand, according to economists, it was a gamble by the Bank of Canada, that inflation had factors other than the housing market (such as the war in Ukraine, supply chain issues and so on) that were beyond the Bank of Canada’s control. According to economists, this would certainly reduce inflation but not immediately. Whether or not it controlled the price of food, oil, it certainly controlled the housing market. The rising rates certainly affected those who took out mortgages for home purchases and took out new loans. According to economists, this would certainly reduce inflation but not immediately. Whether or not it controlled the price of food, oil, it certainly controlled the housing market. The rising rates certainly affected those who took out mortgages for home purchases and took out new loans. We can see that when the Bank of Canada starts raising interest rates from July 2022 and home prices start to cool. Yes, interest rate hikes in 2022 and 2023 have certainly cooled the market, although they have not burst the housing bubble. If interest rates rise sharply, it can become more expensive to get a mortgage, which can reduce demand for houses and condos. Now people are not ready to go to the real estate market! Yes, the housing market has definitely cooled but not cracked yet! The housing bubble has yet to burst and a housing crisis could happen at any time. (My next post will be on another mortgage loan!)

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Easing of Inflation and Canadian Housing Market

“If inflation continues to ease, and our confidence that inflation is headed sustainably to the 2-per-cent target continues to increase, it is reasonable to expect further cuts to our policy interest rate. But we are taking our interest rate decisions one meeting at a time.” Mr. Macklem said. The Bank of Canada is the first G7 central bank to start easing monetary policy. The European Central Bank is expected to follow suit on Thursday, while the U.S. Federal Reserve, which is dealing with a stronger economy and more stubborn inflation, is expected to hold off rate cuts until later in the year. 

The next meeting is on July 24, six weeks from now. This interest rate cut is like “finally, the interest rate is not going to increase.” Nothing more than that.  Looks like this rate cut is not going to bring any momentum in a near future. Since the current inventory dictates price of a house for at least 90 days, there is more than enough inventory in the GTA housing market. Based on the current listing, free hold market may go up whereas condo market will stay same or go down until the current inventory is cleared up since there is too much inventory in the condo market.