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How a U.S.-Canada Trade War Could Impact Canada’s Housing Market

How a U.S.-Canada Trade War Could Impact Canada’s Housing Market

As tensions rise over potential new U.S. tariffs on Canadian goods, the Canadian housing market finds itself at the centre of concern. Industry experts warn that a looming trade war, sparked by the prospect of a 25% tariff on Canadian exports to the U.S., could have far-reaching implications for housing affordability, construction costs, and the broader economy.

The Immediate Impact: Rising Construction Costs

The U.S. and Canada share a robust trading relationship, exchanging billions of dollars' worth of homebuilding materials annually. If President Trump proceeds with the proposed tariffs, and Canada responds with retaliatory measures as Prime Minister Trudeau has indicated, the cost of key construction materials is expected to surge.

Kevin Lee, CEO of the Canadian Home Builders' Association (CHBA), notes that materials like glass products, appliances, hardware, ceramics, and primary metals such as iron, steel, and aluminium would be among the hardest hit. In 2023 alone, Canada imported over $14 billion worth of these metals from the U.S., along with billions more in other essential building supplies. Higher costs for these materials will inevitably be passed on to homebuyers, affecting both new constructions and renovations.

Economic Ripple Effects

While the direct impact on material costs is significant, the broader economic consequences could be even more problematic. Tariffs can trigger economic slowdowns or even recessions, leading to job losses and reduced consumer confidence—factors that directly affect housing demand. As Kevin Lee highlights, "An economic slowdown or recession always translates directly into fewer housing starts."

This is particularly concerning given that Canada's housing market is currently in a recovery phase. A 2025 housing outlook projects a 6% increase in average home prices this year, with housing starts up 2% year-over-year in 2024. A trade war could stall this momentum, exacerbating the country's ongoing housing supply issues.

Challenges for Homebuyers and Renovators

While resale homes may not face direct price increases from tariffs, the renovation sector will likely experience significant cost hikes. Phil Soper, CEO of Royal LePage, points out that the renovation industry relies heavily on imported materials, meaning that homeowners planning upgrades could face unexpectedly high expenses.

Potential Mitigation Strategies

Despite the looming challenges, there are measures that could help mitigate the impact. Suppliers are already seeking alternative sources for materials to reduce dependence on U.S. imports. Additionally, government intervention could play a crucial role.

Some suggests that removing the GST on new homes and lowering high development taxes could help offset the increased costs from tariffs. Moreover, the situation could encourage Canada to diversify its supply chains, fostering greater economic resilience in the long run.

A Resilient Outlook

While the prospect of a trade war poses undeniable risks, Canada’s strong economic fundamentals provide a buffer. As Phil Soper emphasises, "Canada is a G7 country, one of the largest and most dynamic economies on the planet, and we will adjust."

In conclusion, while the potential U.S. tariffs and subsequent trade war could disrupt the Canadian housing market, proactive measures by both the government and the industry could help navigate these turbulent times. Homebuyers, builders, and investors alike will need to stay informed and adaptable as the situation unfolds.

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