A looming trade war with the United States could be “problematic” for Canada’s housing market, industry experts warn, potentially driving up construction and renovation costs on both sides of the border.
The U.S. and Canada are each other’s top trading partners and exchange homebuilding materials worth billions of dollars each year.
Homebuilders are bracing for the impact of a trade war if U.S. President Donald Trump pulls the trigger on Feb. 1 with a 25 per cent tariff on Canadian goods. Prime Minister Justin Trudeau has said he supports the “principle of dollar-for-dollar matching tariffs” if Trump follows through on his threat.
“A trade war started by U.S. tariffs would really be an unfortunate and problematic thing for housing in Canada,” said Kevin Lee, CEO of the Canadian Home Builders’ Association (CHBA).
Retaliatory tariffs from Canada would drive up the cost of construction, affecting housing affordability and supply, Lee said.
But the “biggest concern” for the housing market is the overall impact on the Canadian economy, he said.
“An economic slowdown or recession always translates directly into less housing starts because of uncertainty, potential job loss, etc., so that would be the number one concern for our industry.”
This comes at a time when home prices and housing activity are expected to rise after a “recovery year,” according to real estate watchers.
Royal LePage’s 2025 housing outlook released in December 2024 projected a six per cent jump in average home prices this year.
Nationally, housing starts were up two per cent year over year in 2024, according to the Canada Mortgage and Housing Corporation.
“As Canada looks to increase housing supply, having housing starts drop would be problematic,” Lee said.
Royal LePage CEO Phil Soper told Global News the real estate industry is tied to the overall strength of the economy and high tariffs on Canada will hurt its economy.
“The concern is longer-term, how will it impact homebuilding? How will it impact employment numbers? How will that impact consumer confidence?”
The governor of the Bank of Canada, which delivered a sixth consecutive interest rate cut on Wednesday, said a trade conflict with the U.S. “could be very disruptive to the Canadian economy.”
“The potential for a trade conflict triggered by new U.S. tariffs on Canadian exports is a major uncertainty,” Tiff Macklem said during a news conference Wednesday.
In the short term, the increased costs of building materials could get passed on to homebuyers, Soper said.
“Of course, resale homes, the sale of existing housing won’t be directly impacted, but the renovation industry … is going to experience the negative impact of tariffs, so it will be a difficult adjustment,” he added.
Which building materials could be hit hardest?
The CHBA’s Lee said glass products, appliances, hardware and ceramics are among the top homebuilding materials that Canada imports from the U.S.
He said Canada annually imports $3.5 billion worth of glass products, more than $3 billion in major appliances and $2 billion in hardware from the U.S.
“Those are some of the big ones that would all directly affect housing construction and therefore the cost of construction.”
When it comes to primary metals, including iron, steel and aluminum, Canada imported more than $14 billion worth from the U.S. in 2023, according to Statistics Canada.
The vast majority of the U.S.’s softwood lumber imports come from Canada.
Canadian softwood lumber, which is already facing U.S. duties, could also get hit by Trump’s tariffs. Lee said that “would be a huge problem” because it could have an impact on the long-term supply of lumber products in Canada.
What could blunt the impact on the housing market?
To prepare for the fallout of the tariffs, suppliers are already starting to look at alternative sources, Lee said.
“Our supply chains are going to be critical in finding some alternative solutions to all of this,” he said.
If there’s a silver lining to the potential trade war, Soper said it would force Canada to “become more diversified for the longer term, which is a good thing.”
“People should remember Canada is a G7 country, one of the largest and most dynamic economies on the planet, and we will adjust,” he said.
Lee said there are immediate measures the government can take to ease the pain of a trade war if it happens.
He said things like removing the GST on new homes and lowering the high development taxes could go a long way to countering the increased costs that would come from tariffs.
–with files from Global News’ Craig Lord
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