Canadian builders across the country have been looking for alternative suppliers for several major construction materials ever since the Trump administration imposed a 25% tariff on products like steel and aluminum. Prior to the tariffs being announced, construction input prices rose 0.6% in February in all sectors. This number is likely to increase in the coming months with the tariff war continuing as the US have recently announced global tariffs, driving up construction costs across the world. To combat the effects of these tariffs, Canadian builders have started to look for alternative suppliers, including Mexico and the European Union.
Impacts of Trump tariffs on Canadian builders
According to the Canadian Home Builders Association (CHBA), the Trump tariffs will further degrade housing affordability both in the United States and Canada. Free trade agreements have allowed cross-border trade to happen without friction and led to many international business partnerships. These partnerships are now in jeopardy on both sides as the Canadian government has retaliated with its own set of 25% tariffs targeting US aluminum and steel.
Canada exports over $20 billion in steel and aluminum yearly to the US but also imports some $17 billion in steel and aluminum. This large trade volume was mostly thanks to the free trade agreements, which allowed for competitive pricing and materials sourcing. Tariffs will increase costs on both sides of the border for these vital construction materials, driving up the costs of construction projects.
One of the biggest materials Canada exports is softwood lumber. In fact, Canada supplies about 80% of all softwood lumber used in US homebuilding. Softwood lumber already sees a 20% duty fee at the border, and now, with the recent tariffs, it will push total duties to nearly 40% on softwood imports.
According to the Canadian Home Builders’ Association (CHBA), the impact is already being felt. Kevin Lee, CHBA’s CEO, warned the new tariffs will “further degrade housing affordability,” making it more expensive to build homes in the United States and Canada.
Industry analysts estimate construction costs could rise by 1% to 4% per project, depending on the materials used. That may not sound huge, but on a $10 million residential build, it can mean up to $400,000 in unplanned expenses for Canadian builders. And these increases hit fast. For example, the cost of rebar, aluminum window frames, and copper wiring has already gone up across several provinces since January.
Delays are also mounting. Many finished products—including HVAC units and prefab electrical components—are assembled with Canadian inputs. Once those inputs are tariffed at the US border, the cost of the final product climbs. Some US companies are holding orders or renegotiating contracts to pass the cost back to Canadian buyers.
The overall outlook for Canada doesn’t look favorable if no agreement is reached. The Bank of Canada warns that a prolonged trade standoff could shave up to 3% off GDP growth. Private forecasters now project that 2025 economic growth will hover near zero, with some models predicting a mild recession in 2026 if tariffs remain. That kind of downturn could put downward pressure on housing demand, even as interest rates are expected to fall.
Canadian builders move to source suppliers outside of the US
Faced with rising material costs and unpredictable delivery timelines, many Canadian construction firms are rethinking how they source materials and manage projects. A key focus: reducing reliance on US suppliers.
CHBA itself is advising members to “look at alternatives to U.S. goods,” including domestic manufacturers and overseas suppliers. Builders are responding by diversifying their vendor networks—bringing in products from Europe and Asia and giving more business to Canadian producers of lumber, metal products, and appliances. The cost of these goods is lower than the tariffed goods coming in from the US, making it a viable option in the meantime.
Will tariffs stall the housing market or push policy change?
Where the industry goes next depends heavily on how long these tariffs stay in place and the policies the governments enact. If the trade fight between Canada and the US drags on, economists warn that housing starts could slow significantly. The cost of the material prices will hurt the current margins on projects and keep investors from investing in the market until conditions improve. A recession, even a mild one, may occur in Canada in 2026 experts warn, potentially slowing construction hiring and derailing government housing targets.
To combat these potential outcomes, the Bank of Canada has lowered interest rates to make mortgages more accessible and curb inflation. The quick response has shown promise as the housing markets remain balanced based on current projections heading into late 2025. In addition, provinces and the federal government have acted to try to reduce friction and red tape between interprovincial trade.
This move was in direct retaliation to the tariffs in hopes of decreasing American business reliance. As stated by the Government of Canada, “Eliminating the barriers to internal trade will reduce business costs, increase productivity, and potentially add up to $200 billion to the Canadian economy.
However, affordability remains a major concern. Every minor increase in material costs pushes home prices higher. CHBA is calling on the federal government to respond with additional measures like removing GST or HST from new homes and offering support to builders navigating higher input costs.
Final thoughts
Builders are doing what they can—adjusting contracts, shifting supply chains, and renegotiating timelines—but systemic policy support will be critical if Canada hopes to keep residential construction on track during an escalating trade dispute. If tariffs are scaled back quickly—either through negotiation or political pressure—construction activity could rebound sharply in the second half of 2025. This would help both countries to reduce inflation and prevent the home affordability crisis from spiraling out of control.
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