The U.S. administration’s plan to impose new 50% tariffs on imports from Canada is more of a negotiating tactic than a threat, says CoStar’s chief economist.

As a result, commercial real estate companies need to “stay the course” on planned acquisitions, leasing activity and development projects, Mario Lefebvre told Connect in an interview.

“Whenever I give economic conferences these days, and I give quite a bit of them, I keep repeating to whomever I’m talking to not to rush into decisions because of the last tweet from President Trump,” said Lefebvre. “Stick to the fundamentals.

“Fundamentals are improving in commercial real estate right now. So, continue with the plan that you had in mind right now. I don’t feel the need to urge people to park their capital that they were about to deploy, or change strategy. Things are turning around.”

Lefebvre’s comments come as Prime Minister Mark Carney and U.S. President Donald Trump are slated to intensify negotiations on tariffs following Washington’s announcement that it will impose the higher tariffs on August 19 following Trump’s decision not to renew the Canada-U.S.-Mexico Agreement on free trade.

Trump intends to invoke Section 338 of the U.S. Tariff Act of 1930, a provision that has never before been used. Unlike previous measures, the new duties will not exempt goods traded under the CUSMA, expanding U.S. tariffs’ impact on Canadian exports. The U.S. Trade Representative’s office said the measures will apply to nearly US$20 billion in Canadian goods, representing about 5% of Canada’s exports to the United States.

“I think this is a negotiating tool and it seems to be working because, again, there are meetings now being organized,” between Ottawa and Washington, said Lefebvre.

In meetings at the Premiers Conference in Charlottetown, P.E.I., provincial leaders called on Carney to get tough with Trump after he refused to negotiate a new Canada-U.S.-Mexicco Agreement by a July 1 deadline. Meanwhile, industry and labour groups have called on Careny to take a hard-line stance.

Carney told reporters that Canada could retaliate against the planned U.S. tariffs, but the PM declined to tip his hand.

Lefebvre warned Canadian commercial real estate players not to overreact to Trump’s plan.

“The last thing I want to do is ruin anyone’s holidays and say now is the time to press the panic button,” said Lefebvre. “I don’t think it is. I continue to believe that even though it sometimes looks like Mr. Trump is not listening to anyone, that there are people around him telling him that at one point this is also quite hurtful for the U.S. economy and that some kind of good sense will prevail.”

Although Trump is trying to hit people on the head with big tariff numbers, Lefebvre noted that U.S. customers pay an average of 6% to 8% on duties tied to most U.S. goods. on Canadian products.

He also noted that Canadian government 10-year bond yield rates are about a full percentage point below their U.S. government counterparts and inflation is “well-behaved” when food and energy products are excluded from the Consumer Price Index product basket. Although unemployment has risen to about 6.5% from 4.8% over the past three years, Canada’s annual unemployment rate has averaged 6.5% during the last 15 years.

“The Canadian economy has proven incredibly resilient,” he said. “It continues to show resiliency.”

Currently, Canadian firms are nervous about following through with investment plans because the companies do not know what the Canada-U.S. trade situation will be like a year from now, he added. But by delaying, companies are at risk of having their technology fall behind U.S. counterparts in the age of AI and losing in other ways.

And while the Carney government is looking to capitalize on a free-trade agreement with Europe to offset U.S. tariff hikes, Canadian firms must be able to compete with European rivals to Canada’s increase market share on the continent. Sooner rather than later, Canadian companies that have large contingents of U.S. customers need to execute their plans, Lefebvre.

“I am not throwing stones or pointing fingers at Canadian firms,” he said. “We have brilliant business people in Canada, and I understand their nervousness. But at one point, we’re going to have to pull the trigger on investment, even if the risk is a bit larger.”

The biggest impact of the ongoing Canada-U.S. trade war has been delated investment, he added.

“Investors are nervous, and when they’re nervous, it’s tough to write a big cheque,” he said. “So this is something, the longer it’s going to go, the more negative impact on the potential of the Canadian economy and our productivity, the larger impact it’s going to have.”

But Trump has deliberately spared such Canadian products as critical minerals and potash from the proposed tariff hikes because he knows that the U.S. has a high need for the items. The reality, he added, is that Americans pay the tariffs on Canadian goods.

While Lefebvre is optimistic that good sense will prevail in the negotiations, he warned that tariffs will not go away, even after Trump leaves office.

“I think you should not put your hopes up on that,” said Lefebvre. “We all know what happens when a tax is put in place and eventually absorbed.

“It’s pretty rare that we turn back the clock. Let me remind people that the income tax in Canada was supposed to be a temporary measure.”

In Lefebvre’s view, Trump unveiled the planned large tariffs because he was upset that Canada was playing hard to get on trade concessions.

“But he wanted some attention, he’s got some, and I think now we’re going to sit down and craft the real [deal],” said Lefebvre, hoping that Trump’s plan does not become a reality.

Pictured: CoStar Chief Economist Mario Lefebvre.

Photo: Canadian Association for Business Economics