Intelligent Investment

“More Powerful and Obnoxious” Tariffs

Canada Monthly Market Commentary - February 2026

February 25, 2026 2 Minute Read

Even though the bulk of the U.S. tariffs enacted over the past year have now been invalidated by the U.S. Supreme Court, uncertainty and confusion has only intensified as the U.S. Administration immediately replaced those tariffs with a new set of global duties. The court ruling upheld that the U.S. Administration had exceeded its authority with regards to its “fentanyl” and “reciprocal” tariffs implemented last year. With these tariffs being a major pillar of U.S. economic and foreign policy, the U.S. Administration followed through on earlier warnings and turned to an alternate statute to maintain its tariff policies. This time, a temporary global 10% tariff was put in place that was then abruptly increased to its maximum 15% level. Further escalation has already been threatened in that the U.S. could use alternative tariffs in a “much more powerful and obnoxious way” than before. 

For U.S. trading partners that had recently negotiated trade deals, this chaotic escalation of tariffs has also now put into question the status of those agreements. Whether or not the new global tariffs may constitute a breach of those trade deals is still unclear at this time. As well, there remains the complicated matter of any refunds for past payments on the now invalid tariffs.

In terms of the impact to Canada, the CUSMA exemption still applies on compliant goods which means for the small remaining non-compliant portion of Canadian exports, the U.S. tariff rate has effectively dropped to 15% from 35% previously. However, the punitive sectoral tariffs on steel, aluminum, lumber and autos remain in place as they were enacted through a different process that was not part of the U.S. Supreme Court ruling. Once again, this latest development reinforces the vital nature of the North American free trade agreement for the Canadian economy.

For Canadian commercial real estate lenders, concerns about economic weakness were cited as the top potential challenge for the lending environment this year according to CBRE’s Canadian Real Estate Lenders’ Report. However, the survey also highlighted bullishness and increased acceptance that uncertainty would simply become part of the new operating environment. Lenders are looking to be even more active in 2026 with plans to deploy to additional debt capital and ramp up competition. Outside of a handful of select property types that may face challenges, lenders are open and willing to finance most asset classes. In particular, sentiment around office has quickly rebounded and lenders intend to grow their loan books once again. Term debt spreads have tightened compared to last year and, overall, debt capital for real estate is expected to be robust in 2026.

Economic Highlights:

  • Employment fell by 24,800 jobs in January 2026 and the unemployment rate declined to 6.5%.
  • Headline inflation edged lower to 2.3% in January 2026 while the core measures CPI-Median and CPI-Trim also cooled to 2.5% and 2.4%, respectively.
  • Retail sales for December 2025 decreased 0.4% month-over-month with advanced estimates indicating a 1.5% increase in January.

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