Real Estate Without Borders: Episode Summary

Episode Title: Trade War Takes a Break - Impacts on Canada, Mexico & the US
Host: Real Estate Without Borders
Release Date: February 4, 2025

In this pivotal episode of Real Estate Without Borders, hosts Dave Hutch and Daniel Fosh delve deep into the ongoing trade tensions between the United States, Canada, and Mexico. With tariffs playing a central role, the discussion unpacks the immediate and long-term ramifications of these economic maneuvers on each country's real estate landscape and broader economic health.

1. Introduction to the Trade Tensions

The episode kicks off with Dave and Daniel addressing the buzz surrounding tariffs and their effects on North American economies. Their casual banter sets the stage for a detailed exploration of the subject.

Notable Quote:
Dave Hutch [00:00]: "I am Twitter, okay? I know everything about tariffs to an extent."

2. Overview of the Current Tariff Situation

Daniel provides a concise background on the recent developments, highlighting Canada's retaliatory measures in response to U.S. tariffs imposed under President Donald Trump’s administration. As of February 3rd, Canada has maintained these tariffs, which have stirred significant economic debates and public reactions.

Notable Quote:
Daniel Fosh [02:08]: "Canada and Mexico both announced retaliatory measures in response to the U.S. Tariffs imposed by President Donald Trump."

3. Canada’s Response to U.S. Tariffs

Canada’s strategy involves imposing a 25% tariff on a wide array of U.S. goods, notably targeting alcohol and fruits—industries where Canadian production is limited. The government’s actions extend to canceling initiatives like the Starlink plan, signaling a strong stance against U.S. economic policies.

Notable Quote:
Daniel Fosh [03:03]: "Canada's basically announced that they're going to match with 25% tariffs. They put out a big list of stuff, everything but most notably alcohol and fruits."

4. Impact on the Canadian Economy

The imposition of tariffs has led to tangible repercussions within Canada. Consumers face higher prices on imported goods, and businesses encounter challenges in exporting Canadian products to the U.S. sectors such as alcohol, automotive, and construction are particularly vulnerable. The government’s push for consumers to favor Canadian-made products has met with public disapproval, reflecting widespread dissatisfaction.

Notable Quote:
Dave Hutch [04:08]: "They pulled the American alcohol out of the LCBOs."

5. Mexico’s Response and Current Status

Mexico has taken a slightly different approach by pausing tariffs to allow continued negotiations, a strategic move to potentially ease tensions. Additionally, Mexico has deployed 10,000 personnel to the border to address U.S. border protection requests, signaling a readiness to enforce trade agreements strictly.

Notable Quote:
Daniel Fosh [02:52]: "Mexico has bought themselves a month to continue negotiating because it appears that they are now sending 10,000 people to the border to appease Donald Trump’s border protection request."

6. Impact on the Mexican Economy

Mexico's temporary hold on tariffs provides a window for economic adjustment. By reinforcing border security, Mexico aims to stabilize trade relations while negotiating terms that might benefit its economy. The deployment of additional personnel is both a defensive and a diplomatic maneuver to maintain leverage in negotiations.

Notable Quote:
Daniel Fosh [10:54]: "So they committed to putting 10,000 soldiers on the border, which they did that in 2021 at Biden's request, like, with no tariffs."

7. Implications for the U.S. Economy

The U.S. faces its own set of challenges as the tariffs and retaliatory measures ripple through its economy. Manufacturing sectors, particularly automotive and construction, are experiencing increased costs and operational hurdles. Additionally, President Trump's strategies indicate a broader agenda to overhaul the tax system, potentially eliminating federal income tax to incentivize repatriation of businesses.

Notable Quote:
Daniel Fosh [24:16]: "His goal is to make people pay tax without noticing through tariffs and think that Canada’s paying and then, and then get rid of income tax to try and make it more competitive because he wants to repatriate bunch of businesses."

8. Currency Effects and Investment Opportunities

A significant discussion point revolves around the strength of the U.S. dollar amidst these trade tensions. The robust dollar, juxtaposed with a weaker Canadian peso, creates a tempered impact of the tariffs. This currency dynamic offers unique real estate investment opportunities, particularly in depressed markets like Canada and Mexico, where American investors can capitalize on favorable exchange rates.

Notable Quote:
Dave Hutch [21:45]: "So the tariffs create the perfect storm for buying real estate in one of these economies that's going to be depressed."

9. Real Estate Investment Opportunities

Despite the economic downturns, the episode emphasizes that depressed markets present lucrative real estate opportunities. For instance, in Mexico, regions like Tulum are seeing the peso weaken against the dollar, making property purchases more affordable for American investors. Similarly, Canada's potential economic struggles could lead to attractive investment scenarios as real estate prices adjust.

Notable Quote:
Dave Hutch [14:05]: "As the peso being so weak and your dollar getting stronger… it just opens the floodgates for Americans to come and dominate real estate globally."

10. Regional Vulnerabilities in Canada and Mexico

The hosts break down the most vulnerable regions within both countries:

• Canada:

  • Ontario: The heart of the automotive sector, particularly cities like Windsor and Oshawa, faces significant impacts.
  • Quebec: Home to the aerospace industry, areas like Montreal could see strategic shifts.
  • Atlantic Canada: Dependent on food production and seafood processing, coastal communities might experience economic strain.

• Mexico:

  • Northern States (e.g., Nuevo Leon, Chihuahua): Critical for manufacturing and automotive industries.
  • Central Industrial Hub (e.g., Mexico City, Puebla): Focused on aerospace and technology sectors.
  • Agricultural Regions (e.g., Sinaloa, Guanajuato): Impacted by tariffs on fruits and vegetables.
  • Gulf Coast (e.g., Veracruz): Significant for ports and energy infrastructure.
  • Tech Hubs (e.g., Guadalajara): Emerging as centers for electronic vehicle manufacturing.

Notable Quote:
Dave Hutch [26:08]: "Ontario's a ton of auto sector, right? So you got Windsor, Oshawa, parts of the GTA…"

11. Outlook and Predictions

Daniel predicts that Canada might have to lift foreign buyer bans and adapt to stimulate its economy amidst the tariff-induced downturn. Conversely, Mexico appears more resilient, leveraging its established industries to weather the economic storm. The U.S. economy might also face inflationary pressures, but the strong dollar could continue to present investment opportunities abroad.

Notable Quote:
Daniel Fosh [17:27]: "I think that Americans will be the number one buyers of Canada. The 51st state of them."

12. Conclusions and Future Perspectives

The hosts conclude by reiterating the dynamic nature of trade relations and their profound implications on real estate investment. They highlight the necessity for American investors to stay informed and agile, leveraging the evolving economic landscape to expand their portfolios internationally.

Notable Quote:
Dave Hutch [35:05]: "It's an emerging thing. And you know what the cool part is? This trade war could be over very quickly and then we can move on to being experts in something else next week."

Key Takeaways:

• Tariffs as Economic Tools: The use of tariffs by the U.S., Canada, and Mexico serves as both a protective and retaliatory economic strategy, impacting various sectors differently.

• Investment Opportunities: Depressed real estate markets in Canada and Mexico present unique investment prospects for American investors, especially when considering currency fluctuations.

• Regional Impacts: Specific regions within each country are more vulnerable based on their economic dependencies, necessitating targeted investment strategies.

• Future Dynamics: The trade war’s resolution remains uncertain, with potential swift changes that could alter investment landscapes rapidly.

Upcoming Episode Teaser:
Next week, the hosts will explore the most and least expensive countries to live in, providing valuable insights for investors considering global real estate diversification.

Credits:
Real Estate Without Borders (Podcast Episode Transcript)