“The situation is not good” is how CIBC Capital Markets managing director and deputy chief economist Benjamin Tal began his speech to open the Canadian Apartment Investment Conference at the Metro Toronto Convention Centre yesterday morning.

“We are trying to make sense of something that does not make sense and I believe that, as business people who make decisions on a daily basis, our only tool is logic. Can we fight this madness with logic? 

“I say we have no choice because without logic we are lost. So we have to stick to some logical thinking, and I believe that logic will trump Trump.”

Tal said the United States’ war with Iran and the “tariff madness” the country introduced aren’t sustainable because they’re hurting the U.S., Canadian and global economies. A resolution must be found and, while he doesn’t think it will be perfect and it will likely take longer than expected, he expects it to happen.

Tal anticipates the next six months will be a transition period but, for the rest of 2027 and 2028, he thinks Canada will be in a stronger overall position than it’s in now.

Inflation, interest rates and tariffs

Deglobalization, tariffs, just-in-case inventories, tight labour markets, immigration policy, fiscal policy and artificial intelligence are permanent structural changes and are all inflationary, according to Tal. 

Both the Bank of Canada and the U.S.-based Federal Reserve System have a two per cent inflation target that they won’t touch, so Tal said long-term interest rates in both countries will remain elevated.

“A tariff is basically inflation with a passport,” said Tal. “Look what's happening in the U.S., where inflation is 3.5 per cent because of tariffs and energy prices and the Fed, instead of cutting interest rates, may be raising interest rates despite what Trump is saying.”

Canada implementing retaliatory tariffs against the U.S. is a terrible idea from an economic perspective because of the inflationary spin-offs that put the country at risk of a “semi-recession,” according to Tal, but Canadian Prime Minister Mark Carney and his cabinet put them in place for political reasons.

Tal believes the biggest impediment to ending the trade war is the auto sector which, even when an agreement is eventually reached, will shrink by 10 to 15 per cent in Canada over the next few years. The Canadian forestry industry is another likely casualty, he added.

Investing in Canada is important

Canada is correctly making major investments in infrastructure across the country to “add oxygen to the economy,” said Tal, who thinks these measures will expand productivity and economic growth.

While Tal would prefer government funds to be spent on health and education, he said there are economic benefits to increasing defence spending if the money is invested well. 

Tal said diversifying the Canadian economy and making it less reliant on the U.S. is admirable, but very difficult to do. 

Mortgage shock is over, which should free up money for Canadian consumers once this period of uncertainty ends.

Demographic impact on housing

Almost all of Canada’s population growth is coming from immigration, and Tal said the optimum number of immigrants entering Canada is between 350,000 and 400,000 annually — which is approximately one per cent of the country’s population. 

That was the long-term trend before the numbers took massive jumps in 2023 and 2024 before being drastically reduced.

“Your industry can do extremely well in this environment,” Tal said of that optimum rate of population growth and its impact on rental housing. 

“When it comes to the housing market and the rental market, I think that, after four years of correction and slowdown, we are starting to move in the right direction.”

Tal said the introduction, or re-introduction, of rent controls would be “crazy” and a big mistake.