Tariff cheat sheet: Breaking down the trade war for builders

After weeks and weeks of threats, delays and changes, U.S. President Donald Trump has launched his trade war against Canada. Here’s what you need to know.

What is impacted: The U.S. is now imposing 25% tariffs on all goods imported from Canada, with a 10% tariff on energy and critical minerals. This includes a plethora of products but let’s focus on two of the big ones.

• Wood – In 2020, 67% of Canada’s softwood lumber production was exported, with 84% of these exports destined for the U.S. In 2024, the United States imported wood and articles of wood, including wood charcoal, from Canada totaling approximately $11.59 billion.
• Steel – In 2024, the U.S. imported approximately $7.69 billion worth of iron and steel products from Canada, making us its largest supplier. However, Steel is facing a double whammy. In addition to the current tariffs, Trump plans to implement 25% more tariffs starting later this month, meaning Canadian imports would have a 50% tariff placed on them.

Both ways: Canada has fired back with immediate matching tariffs on $30 billion worth of American goods. For construction, this includes:

• Sands for concrete
• A variety of plastics used in building products
• Floor coverings
• Engineered wood products
• Construction equipment tires
• Hand tools
• Power tools
• Lighting fixtures
  

After a review period of 21 days, Prime Minister Justin Trudeau has promised to raise this retaliation to impact $155 billion worth of American goods.

What you can expect to see:

• Business closures – Communities with large dependence on industries that mainly export to the U.S. are in trouble. This is especially true for eastern steel/aluminum producers who are facing double the tariffs. Steel orders were already slowing and at least one plant making electrical cables has shut its doors.
• Job losses – A report by the Washington-based Brookings Institution predicts the tariffs could kill 510,000 Canadian jobs. Canadians are much more pessmistic. Quebec says it could lose up to 100,000 jobs if the tariffs remain in place for six months and up to 160,000 if they last a year. Ontario believes 500,000 jobs are at risk in Ontario alone.
• ‘Buy Canadian’ movements – We have already seen multiple provinces float policies that would ban U.S. procurement. Ontario has shredded a $100M contract with StarLink and economists have encouraged builders to get goods from Canadian producers as much as possible.
• Higher construction costs – Countervailing tariffs could cause increases in construction costs say home building groups. Canada imports some $3.5B in glass and glass products, $3.1B in major appliances, $2.2B in hardware, and about $1B in ceramic tile and products. Our second phase of tariffs, slated to come into place after 21 days, currently includes steel and aluminum. Canada imports some $17B of steel and aluminum. 
• Increased public sector work – With a federal election on the horizon, some economics experts believe candidates will have little choice but to make up for economic hit from tariffs with government spending, including large public infrastructure projects. This could provide opportunity for builders to have steady work and create jobs.
• Recession – Yep, that dreaded word. Economists say if these tariffs contine, the nation will likely be plunged into a full-blown recession this year.

In the days leading up to the tariffs showed a consistent decline in the Canadian stock market, with a notable dip following the tariffs and counter tariffs.

The response from the construction sector has been swift, with many warning that retaliating with our own tariffs could be catestrophic. Here’s what industry leaders are saying:

While Canada’s retaliatory tariffs are understandable, all considerations regarding the industry and housing supply and affordability should be considered, with an emphasis on avoiding tariffs on construction products and materials, unless other domestic or import solutions can be easily found for comparable prices. Governments can also help offset the impact that countervailing tariffs will inevitably have on housing affordability by removing the GST (and PST/HST) on new construction, as well as lowering development taxes at the municipal level, particularly in those municipalities with extremely high development taxes.

Canadian Home Builders’ Association CEO Kevin Lee

These tariffs present a significant risk for the construction industry. This likely means increased costs for homebuilding and trade-enabling infrastructure, impacts to our supply chains and trading relationships, and a weakening of our economic development and productivity. While the federal government is right to respond in kind, CCA reiterates its call for all governments to consider economic measures to support Canadian businesses and stimulate our economy, in consultation with industry. 

The Canadian Construction Association

Canadian retaliation, while understandable in the circumstances, will magnify the blow to our economy by raising costs/prices for consumer goods and business inputs. This is particularly true given that the U.S. is the number one source of Canadian and B.C. imports.

Jock Finlayson, Senior Economist, Independent Contractors and Businesses Association

And so it begins. A trade war with no winners. Critical that we stay calm, calulated, respond thoughtfully and lets not overreact. Hard to know the impact, with such policy volatility, but I suspect potentially less than some fear. In the end moves like this, that make so little sense, are unlikely to last. 

Jon Love, Founder, KingSett Capital

Breaking internal barriers: There have also been calls to make provincial trade easier by cutting inter-provincial red tape. Last week, officials told the provinces and territories Friday that Ottawa will remove more than half of federal internal trade barriers in an effort to make the nation less reliant on the U.S. Statistics Canada data shows that the most commonly reported obstacle to interprovincial trade was the cost of transportation for both businesses purchasing (27.4%) and selling (23.2%) goods or services.

Deja vu: In 2018, the Trump administration imposed significant tariffs on Canadian steel (25%) and aluminum (10%) imports, citing national security concerns under Section 232 of the Trade Expansion Act. Canada retaliated by imposing tariffs on $12.6 billion worth of U.S. goods, including steel, aluminum, and various consumer products. This trade conflict resulted in economic disruptions for both countries, with Canadian exports of steel to the US dropping by nearly 40% in the first month of implementation, while economists estimated at least 75,000 job losses across the U.S. manufacturing industry by mid-2019.