The re-election of Donald Trump as President of the United States is set to have immediate and long-term economic and social impacts on Canada. Financial markets, especially bond markets that influence fixed mortgage rates, reacted swiftly. Within days, the yield on the U.S. 10-year Treasury bond rose by 14 basis points, crossing 4.4%, and Canada’s 5-year government bond yield followed suit, reaching 3.11%. As a result, some Canadian lenders increased their fixed mortgage rates by 5 to 10 basis points.

How U.S. Economic Policies Could Influence Canada

The close integration between the Canadian and U.S. economies means that U.S. economic growth often benefits Canada. However, a growth-focused U.S. policy, which might include additional tax cuts and public spending, could drive up the U.S. national debt. This would likely lead to more U.S. government bonds being issued, increasing bond yields and putting upward pressure on fixed mortgage rates in both the U.S. and Canada.

Tariffs and Inflation Risks

One of Trump’s key campaign promises, a 10% tariff on nearly all imports, is seen as inflationary. Earlier this year, 16 Nobel laureate economists cautioned that such tariffs could reignite inflation, with the potential to push rates above 9%. This could prompt the Federal Reserve and possibly the Bank of Canada to halt their rate-cutting cycles, impacting borrowing costs.

Social Repercussions: Potential Increase in Asylum Seekers

Trump’s stance on immigration, including threats of mass deportations, raises concerns about a possible influx of asylum seekers to Canada. Such an increase could put additional pressure on Canada’s immigration and social systems, which are already adapting to higher immigration levels and population growth.

Looking Ahead

As these economic and social developments unfold, Canadians should be prepared for potential changes in mortgage rates, inflationary pressures, and shifts in immigration patterns. The re-election of Trump signals possible volatility in the Canadian economy, with implications for borrowers, investors, and policymakers alike.