Canada Market Update: August 2026
By Daniel Lester – Analyst
Trade War Escalates: Trump Moves to Double Canadian Auto Tariffs to 50%
Canada-U.S. trade relations have been unstable for over a year, and this week made that worse. The current cycle traces back to Trump’s original 2025 tariff actions: a 25% blanket tariff on non-USMCA-compliant Canadian goods, a 25% tariff on all non-U.S.-built autos, and a 50% tariff on steel and aluminum, followed by months of on-and-off negotiations, delayed deadlines, and periodic threats to raise rates further if Canada retaliated. Talks between Ottawa and Washington had appeared close to a deal as recently as mid-August, with reporting suggesting the U.S. was prepared to lower tariffs on steel, aluminum, and autos in exchange for Canada restoring American alcohol to provincial liquor store shelves.
That deal fell apart late on August 21. Prime Minister Mark Carney said Canada would not finalize an agreement on the terms offered, and U.S. Trade Representative Jamieson Greer said Canada had sought additional concessions on steel, aluminum, autos, and softwood lumber that the U.S. wasn’t prepared to give. Within hours, the U.S. imposed new 50% tariffs on roughly $20 billion of Canadian goods under Section 338 of the Tariff Act of 1930, hitting alcohol, dairy, cement, wood and paper products, and other targeted categories, framed as a response to Canadian restrictions on U.S. alcohol, auto tariffs, and dairy market access under supply management. Carney called it a miscalculation, said Canada was suspending trade talks, and confirmed matching dollar-for-dollar counter-tariffs on American steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics, effective September 8.
Then, yesterday, August 24, Trump raised the stakes again. In a Truth Social post, he said the U.S. will increase tariffs on Canadian cars, trucks, auto parts, and steel to 50% effective January 1, 2027, doubling the current 25% rate on autos. He accused Canada of “ripping off” the U.S. for years and said the increase would stand unless companies build in the U.S. instead, where he says tariffs are zero.
TD Economics estimates the current round of U.S. tariffs could shave 0.3 to 0.6 percentage points off Canadian GDP growth over the next year, with Canada’s planned retaliation subtracting a further 0.1 point, pushing 2027 growth toward the mid-1% range instead of the roughly 2% previously forecast. On the inflation side, the affected trade volume is smaller than in prior rounds, and Canadian core inflation is sitting comfortably inside the Bank of Canada’s target range, which gives the BoC more room to hold rates steady than it otherwise would have. Markets have reacted, but so far in an orderly way: the loonie has softened and short-term Canadian yields have edged down as investors price in a longer, less certain trade relationship rather than a single shock.
None of this stops CRE lending, but it does shift where caution shows up. We’d expect lenders to get more selective on industrial and logistics assets with cross-border supply chains or auto-adjacent tenants, and to ask sharper questions on any deal with U.S. trade exposure baked into the rent roll. On the pricing side, continued volatility in government bond yields flows straight into 5-year fixed CRE debt costs, so borrowers weighing a long-term rate lock against a shorter bridge or variable structure right now have a real timing decision to make, not just a rate decision. We’ll keep flagging this as the September 8 counter-tariff date, and the broader USMCA renegotiation develops.
GO REIT-Led Consortium to Acquire H&R REIT in $6.7 Billion Transaction
H&R Real Estate Investment Trust announced on August 11 that it has entered into an agreement to be acquired in a cash-and-unit deal valued at approximately $6.7 billion, including assumed debt. H&R unitholders will receive $4.28 per unit in cash plus 0.5688 units of GO Residential REIT for every H&R unit held, representing total consideration of $12.01 per unit, a 14.5% premium to H&R’s unaffected price before deal speculation began in June. The transaction is expected to close in Q4 2026, subject to unit holder, court, and regulatory approval, and H&R’s board has unanimously recommended that unit holders vote in favor.
The buyer group is not a single acquirer, it is a consortium carving up H&R’s portfolio by asset type. GO Residential REIT takes H&R’s Lantower residential portfolio across the U.S. Sunbelt along with several New York assets, funded through the issuance of GO REIT units and the assumption of roughly $550 million in H&R debentures plus about US$1.1 billion of property-level debt. Blackstone Real Estate takes a slice of H&R’s Canadian industrial holdings for cash. Crestpoint and PSP Investments, who already co-own certain of those industrial properties with H&R, are buying out the balance of those interests. CRAL, a company controlled by the family of H&R’s CEO, Tom Hofstedter, is taking the remaining non-core assets.
Once the dust settles, the pro forma GO REIT becomes the second-largest publicly traded residential REIT in Canada by enterprise value, with 35 properties and over 13,300 suites across eight markets in Canada and the U.S. H&R unitholders end up owning roughly 66.9% of that combined entity and get two board seats, so this isn’t a clean exit for H&R, it’s a conversion into a bigger, more focused residential platform. The GO REIT unit portion of the consideration is structured as a tax-deferred rollover for Canadian resident unitholders.
CMHC’s MLI Select Energy Rules Get Tougher After September 30
CMHC’s MLI Select program stops accepting energy efficiency attestations against the 2015 National Building Code and 2017 National Energy Code for Buildings on September 30, 2026. Every new construction file submitted after that date gets scored against the 2020 NBC and 2020 NECB instead, both meaningfully tougher baselines. Nothing else about the program is changing: the three-point tiers (50, 70, 100) and their associated benefits, a 10%, 20%, and 30% premium discount, along with amortization stretching to 45 and eventually 50 years at the top tier, all stay exactly where they are. Affordability and accessibility scoring are also untouched. The only thing moving is how energy points get calculated.
That sounds like a technical footnote, but it changes real numbers. Because the 2020 codes set a higher performance bar, the same building design that earns 30 energy points under the 2015 standard might only earn 20 under the 2020 standard, with zero changes to the actual construction. On a project sitting right at a tier line, that’s the difference between qualifying for the 45-year amortization tier and dropping to the 10% discount tier with standard amortization, a swing that can run into six figures over the life of the loan on a mid-sized purpose-built rental deal.
Sponsors currently in the pipeline have a real decision to make. If a file is close to complete and the energy attestation is already built around the 2015/2017 codes, the move is to finish it and submit before September 30 and lock in the easier scoring. If a project is still mid-design and won’t be shovel-ready until 2027 anyway, there’s no point engineering to a standard that won’t apply; the pro forma should be rebuilt assuming 2020 code scoring now, with a hard look at whether the 70-point tier still pencils if 100 points isn’t realistic anymore. Expect CMHC processing queues to back up as everyone with a file close to the line tries to beat the deadline, so timing conversations with lenders and energy modellers now matters more than usual.
