Living with Uncertainty – Normalizing the Tariff Threat

“This indecision’s buggin’ me…” sang Mick Jones, punk pioneer and lead guitar player for the Clash. While ostensibly about a frustrating romantic relationship, he could easily have been lamenting the uncertainty brought on by the on and again off again threat of crippling tariffs that has characterized the Trump administration’s confounding approach to international trade. Uncertainty is a killer of confidence, and confidence is the foundation of investment, whether it’s the macro-level prospect of a new manufacturing plant or the micro-level of a family looking to purchase a home.

As a result, the past several months have seen home sales across Canada and BC plummet under the weight of a sudden and severe disruption to expectations that rippled through consumer and business behaviour. In this case, the shock was driven by unpredictable trade policy, rising tariffs, and the spectre of recession. But as we move into the latter half of 2025, there are signs that the worst may be behind us.

Confidence rising

The Economic Policy Uncertainty Index, which tracks media mentions of economic uncertainty, reached an all-time high in March—nearly 1,000 points above its previous pandemic-era peak. That spike coincided with a collapse in business confidence and a sharp downturn in home sales. However, with the relative quiet on the tariff front, at least with respect to Canada, uncertainty appears to be fading and confidence in the market is returning. That alone is a meaningful shift.

Uncertainty is giving way to clarity on the eventual economic impact of US import tariffs. While initial estimates of a tariff induced recession grabbed headlines early in the year, the actual impact may be far less severe. The large-font foreboding of a 35% tariff on Canadian goods bought by US firms and households can be largely ignored for the fine print reality that most Canadian exports are CUSMA compliant and therefore sheltered from tariffs. When adjusted for exemptions, trade volumes, and product-specific nuances, the effective tariff rate on Canadian exports to the United States is closer to 5%. That’s still a headwind, but not a hurricane. For BC, the recent increase in lumber tariffs will sting, especially for forestry-dependent communities but our province’s diverse export base—from technology to tourism—offers a buffer that will soften the blow.

Home prices stabilizing

In the housing sector, the Fraser Valley stands out as a region that has borne the brunt of the downturn. Home sales through the month of August are on track for their worst year in a quarter century. But beneath the surface, pent-up demand is building. The Fraser Valley remains the fastest-growing collection of municipalities in BC, with strong demographic fundamentals that will feed robust housing demand for the foreseeable future.

Affordability in the Fraser Valley, of course, remains a central challenge. But here too, there is reason for cautious optimism. Home prices have largely stabilized following substantial declines from the pandemic-era peak, and the Bank of Canada is expected to begin easing interest rates in the coming months, which should provide at least some modest stimulus to a market already showing at least modest signs of recovery.

There are still risks, of course. When global trade tensions can flare up with a late night all-caps social media post, uncertainty will remain an obstacle, but all signs point to a housing market that is transitioning to recovery. The uncertainty shock is fading. Tariff impacts are proving less catastrophic than feared. Demographics remain supportive, especially in high-growth regions like Surrey and Langley, and monetary policy is poised to shift from restraint to support. Taken together, these developments point to a much stronger second half of 2025 and real momentum heading into 2026. Returning to the wisdom of The Clash (as one should always do), while the market has been beaten up, it’s not down for good and things will eventually swing back.