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"Unwarranted And Reckless": Canada's Housing Industry Reacts To Tariffs

Well, it happened. South of the border, President Donald Trump’s ongoing tariff threats have turned into a reality. Sweeping 25% tariffs went into effect at 12:01am today. In response, Prime Minister Justin Trudeau announced tariffs on billions worth of American goods. As we outlined when the threats first emerged, this ultimately presents a lose-lose situation for both sides – with consumers’ bank accounts taking the hit in an already embattled economy. Of course, the housing market is no exception. The worry is that tariff hikes could impact everything from consumer confidence to the pace of new home construction. Some, however, are more worried than others. We asked several big players in the economy and real estate worlds to weigh in... How Tariffs And Job Growth Could Impact Wednesday's Interest Rate Cut Decision Bank of Canada/X A Residential Construction Industry "Already In Dire Straights"Ontario’s building industry was quick to respond to the new trade war, with an early morning press release from the Residential Construction Council of Ontario (RESCON) driving this point home. RESCON warns that Trump’s new tariffs will lead to significant price hikes for building materials and substantially raise the price tag of a new home in both the US and Canada.“The residential construction industry on both sides of the border is already in dire straits due to a perfect storm of issues and this completely unwarranted and reckless act will only cause more economic hardship for builders on both sides of the border,” says RESCON President Richard Lyall in the release. “The US National Association of Home Builders shares our view that tariffs and affordability are bad on both sides of the border. Tariffs will make it more costly for building materials and, in the end, the costs of these unnecessary levies will be passed on to consumers. This will lead to a further slowdown in residential construction activity and exacerbate our already dire housing affordability crisis.”It’s no secret that Canada’s construction industry had weathered a few rough years, thanks to everything from climbing material costs and labour shortages to sky-high interest rates and rising development fees. In short, costs could soar, impacting the country’s housing market and overall economy. “Affordability is already a serious challenge for consumers on both sides of the border,” says Lyall. “It will drive inflation and costs higher right across the board which oddly contradicts the US president's stated objective of lowering prices and inflation. The uncertainty of tariffs slowed sales and rental construction on both sides of the border. Tariffs will drive this lower to no purpose.”According to RESCON, the economic uncertainty created by tariffs will almost certainly lead to a slowdown in new housing construction in both countries, as supply chains are intertwined. It highlights how the US imports large amounts of steel, aluminum, lumber, cement, and gypsum for use in construction, while Canada exported 6.56 million tons of steel to the US in 2024, and accounted for 56% of aluminum imports to the US in 2023. “Conversely, we rely on materials imported from the US such as plywood, glass, metal fittings, light fixtures, ceramics, electrical parts, and plumbing and mechanical components. Reciprocal tariffs will raise prices for those goods and supply chains will be disrupted as builders look for alternative sources for materials,” reads the release. “This will have severe repercussions for the housing sector in the US and Canada and we will undoubtedly have fewer housing starts,” says Lyall. “The tariffs will only undermine the industry, at a time when the residential construction sector is most in need of stability and certainty.” Ontario Government Announces New Builds Are Exempt From Rent Control storeys.com "Shaken Consumer Confidence"Tariffs come at a time when the embattled new home market is already one characterized by a virtual halt in new projects. It’s the latest blow to the construction industry when there’s a loud and clear agenda to build as many homes as possible to address a widespread supply shortage. “With today’s enactment of tariffs by the US Government and Canada’s implementation of countervailing measures, the escalating trade war is creating additional stress on the GTA housing market,” says Dave Wilkes, President and CEO of BILD. “The economic uncertainty caused by the potential for tariffs, and now by their actual implementation, has shaken consumer confidence during what is already an unprecedented downturn in new home sales.”Like Lyall, Wilkes says a hard-hitting impact on supply chains is inevitable. “There can be little doubt that impacts on materials and supply chains from tariffs, and potential trade disruptions will increase the cost-to-build crisis. “With housing needs high in the GTA and residential and commercial construction being a significant source of domestic employment and economic growth, now is the time for governments at all levels to invest in housing for Canadians and seek meaningful solutions within our control to lower the cost to build, spur housing starts, and bolster employment,” says Wilkes. Of course, these requests are nothing new. Tariffs or not, the building industry has long put pressure on the government to drop the fees and red tape that slow the materialization of new builds.The expected consumer uncertainty isn't reserved for the new home market. "These tariffs will trigger economic and consumer uncertainty, which will inevitably lead some prospective buyers and sellers to delay decisions, and drive others to rely more heavily on trusted real estate brands and brokerages for expert counsel," says Don Kottick, President and CEO of Sotheby's International Reality Canada. "However, it's crucial to recognize that housing remains a fundamental necessity, and years of pent-up demand and population gains continues to drive activity. Further, we expect the Bank of Canada to cut interest rates, which will cushion the impact on the housing market and provide a counterbalance to economic pressures. Despite headwinds, we expect buyers and sellers to adapt to evolving market conditions and engage in the market, and for strategic and opportunistic investors to capitalize on market uncertainty to seize valuable opportunities."Kottick isn't alone in his cautious optimism. "While these tariffs mean a slower return to 'normal' than we were expecting, uncertainty can lead to opportunities, and we remain open and committed to tackling economic challenges with creativity and positivity," says Barrett Sprowson, Senior Vice President, Sales and Marketing, Peterson. "Among our peers, there is a sense of frustration at the continued moving target around possible construction costs coming down. Collaboration and advocacy will be critical during this time." building permits building permits Tariffs "Least Of The Issues to Worry About" Not everyone is so convinced that tariffs are so catastrophic to Canada’s building industry. Marlon Bray, Executive Vice President of Clark Construction Management, calls the concern around today's tariffs “somewhat muted” in the scheme of things. “The potential impact on the majority of high-rise residential projects in the GTA will likely be minimal,” says Bray. “Quite frankly, the industry is already on its knees with a massive drop off in sales and starts for both condominium and rental; major layoffs have been the norm for a while, and this new challenge might be up there with the least of the issues to worry about.”If it sounds grim, well, that’s the reality. “While there might be some short-term disruption, the hard construction costs have already bottomed, so most companies will be working around it or just delaying projects to avoid the full impact,” says Bray. “I really cannot emphasize enough how bad the high-rise market in the GTA is at this point already; worse than 1990. Twenty-five percent of $0 equals $0. Some projects will be impacted, depending on timing, but as an overall industry it’s a huge shrug of the shoulders. We have union labour negotiations going on; anyone really noticed? The election was a damp squib.”Bray says that it appears the US will face the vast majority of the brunt from the tariffs in terms of construction. “In terms of specific concerns going forward, HVAC, electrical equipment, and steel tend to be the common denominators as the tariffs expand out,” says Bray. “This could impact existing projects depending on the specifics and structure of the contract, which is why we have lawyers who are not impacted by tariffs, just always high rates.” What The Big Banks Are Saying About Tariffs, Interest Rates, And Housing Shutterstock "A Huge, Huge Blow To The Canadian Economy"Carl Gomez, Chief Economist & Head of Market Analytics for CoStar Group in Canada, doesn’t sugar coat the impact of tariffs on the Canadian economy. “Canada is obviously a small country with a large trading profile to the United States – by geography, necessity, and legislation,” Gomez tells STOREYS. “So, to start paying 25% tariffs on a range of things is unequivocally bad for the economy. Just how bad depends on the duration that this stays as is. But the Bank of Canada has actually done a scenario looking at the full impact and said that it can impact the GDP as much as three percentage points.”This would mean a recession for the Canadian economy if the tariffs stick, says Gomez. He highlights the interconnectivity of the economy and the real estate market – not just residential, but pretty much all sectors. He says that, in order to support growth, “before they even think about inflation,” the Bank of Canada could cut short-term interest rates more aggressively than anticipated – something that could benefit variable rate mortgage holders. As for the economic side of tariffs and their impact on the housing market, Gomez says. “There are a whole host of people – particularly in Ontario and Quebec – whose jobs will be at risk,” says Gomez. Inevitably, this could impact household real estate decisions. Like Lyall and Wilkes, Gomez too essentially says the tariffs could add insult to injury on the new home construction front. Gomez also points to the industrial sector. “A good chunk of industry is tied to warehousing and the warehousing deals with a lot of consumer and manufactured goods,” says Gomez. “A supply chain disruption could have a very direct impact on the industrial real estate markets, in particular, the stuff that is manufacturing-centric, but even the stuff that's consumer centric and involves warehousing.” Even large-scale retail could face challenges, says Gomez. “A lot of investors these days have been looking at grocery-anchored shopping centers because people need to eat. But, what could ultimately happen over a longer period of time, is that tariffs could curb the ability for consumers to spend because prices increase; not to mention, consumers may shift their spending habits and direct themselves more to Canadian items. So, ultimately, a shift in spending could impact retail centres, as retailers shift the goods that they need, the pricing, and everything else.” Finally, Gomez points to the office sector, one that's faced a rough few years. While some of the demand has started to return, Gomez says that leasing demand requires tenants to have confidence. "Tenants may pull back on on hiring or pull back on investing, that confidence may not be there," he says. "And I think that confidence is the bigger factor for investment activity among real estate investors to to to dive into the market. Uncertainly could impact this."