The re-election of Donald Trump as president
of the United States will have economic and social repercussions in Canada.
There was an, almost, immediate reaction to
the re-election in the bond market which drives fixed-rate mortgage
pricing. Yields jumped triggering rate
increases by some lenders.
In the days after the election, the yield on
10-year U.S. treasury bills rose 14 basis-points to more than 4.4%. Five-year Government of Canada bond yields
climbed to 3.11%. Some lenders responded
with fixed-rate increases of 5 to 10 basis-points.
The high level of integration between Canada
and America usually means a strong economy there is good here. But there can be a downside. A pro-growth agenda that includes more tax
cuts and government spending would likely increase the U.S. national debt. In turn the government would issue more
bonds, which would depress bond prices and raise yields, putting upward
pressure on fixed-rate mortgage costs in the U.S. and here.
One of the president-elect’s biggest campaign
promises is seen as highly inflationary: a 10% tariff on virtually everything
entering the U.S. Earlier this year 16
Nobel Prize-winning economists signed a letter saying Trump’s proposals would “reignite”
inflation, potentially pushing it back above 9.0%. That would end rate cuts by the U.S. Federal
Reserve and likely the Bank of Canada as well.
Threats of mass deportations, made by the
incoming U.S. president, have triggered concerns about a surge in asylum
seekers coming to Canada as this country struggles to adjust to higher
immigration and population growth.