Tariffs explained: What a trade war means for Canadian construction
If implemented, 25% tariffs could damage both economies.

After months of threats, U.S. President Donald Trump may (or may not) implement 25% tariffs on all most Canadian goods (oil would recieve a 10% tariff).
First, they were supposed to go into effect on day one of Trump’s presidency. And then they were scheduled for Feb. 1st. Then they were scheduled for Feb. 4. At the time this article is being written, Trump announced the tariffs would be delayed for at least 30 days after speaking with Prime Minister Justin Trudeau.
“The Tariffs announced on Saturday will be paused for a 30 day period to see whether or not a final Economic deal with Canada can be structured,” Trump wrote on Truth Social.
What does he want from Canada?
It’s not totally clear what Trump hopes to accomplish, but the common theme is a feeling of being treated unfairly. Officially, he and his team have claimed that it is in response to lax borders and drug smuggling.
In his executive order to implement the tariffs, Trump said this: “the sustained influx of illicit opioids and other drugs has profound consequences on our Nation, endangering lives and putting a severe strain on our healthcare system, public services, and communities.”
But a day later he posted this on social media: “We pay hundreds of Billions of Dollars to SUBSIDIZE Canada. Why? There is no reason. We don’t need anything they have. We have unlimited Energy, should make our own Cars, and have more Lumber than we can ever use. Without this massive subsidy, Canada ceases to exist as a viable Country. Harsh but true!”

He’s also said many times that Canada should be annexed by the U.S. as its 51st state and called Prime Minister Justin Trudeau its governor. Whether or not this is meant to be taken literally is anyone’s guess.
Despite provincial and national efforts to address some of these concerns or explain the realities of North American trade, Trump has said there is nothing Canada can do right now to avoid tariffs. He also denied using tariffs as a negotiating tactic to secure borders and that they were “purely” economical.
However, based on his decision to delay or halt tariffs in other countries recently, it appears Trump is open to negotiation. What it would take to get him to stop these tariffs in Canada, remains to be seen.
Does he have a point?
When it comes to toxic drugs and immigration, the government of Canada says less than 1% of the fentanyl and illegal crossings into the United States come from Canada. Despite Canada promising more than $1 billion to secure borders, Trump says it’s not enough to avoid the tariffs.
Trade is more complicated, but economists agree that it is not clear what data Trump is referencing and analyzing our trade relationship requires more nuance.
According to TD Canada, Canada is the largest export market for the U.S. and makes up one of the smallest trade deficits, owing largely to U.S. demand for energy-related products.
“With respect to Trump’s assertion that the U.S. subsidizes Canada to the tune of US$200 billion per year, it’s unclear where this number is derived,” said TD economists. “In any event, rather than a subsidy, the U.S. trade deficit is a by-product of U.S. economic outperformance relative to other countries.”
While Canada does have a trade surplus with the United States, it’s due almost entirely to oil and gas purchased by the U.S. Last year, Canadian exports of energy products (oil, natural gas, power) to the U.S amounted to nearly $170 billion, or almost 1/3 of total shipments. In contrast, energy accounted for only 6% of all U.S. imports. Put simply, Canadian sources are critical to U.S. energy security.
Remove Canadian energy exports from the equation and the trade story flips. Ex-energy, the U.S. enjoys a trade surplus with Canada of around C$60 billion (US$45 billion).
What does it mean for builders?
It’s clear that vast chunks of both economies will be impacted, including the construction sector.
“Virtually all economists think that the impact of the tariffs will be very bad for America and for the world,” said Joseph Stiglitz, an economics professor at Columbia University and a winner of the Nobel prize in economic sciences. “They will almost surely be inflationary.”
Homebuilding, one of Canada’s biggest pressing issues, is facing substantial disruption.
“Ontario’s residential construction industry, like many others across the country, are bracing for the impact of the tariffs,” says RESCON president Richard Lyall. “The residential construction industry is already challenged. The move is reckless and will cause economic hardship in both the U.S. and Canada, affecting tens of billions of dollars of trade in construction materials alone. Such levies will only increase costs and lead to a further slowdown in residential construction activity which will exacerbate an already dire housing affordability crisis.”
He explained that the present situation is a much more significant event than the tariffs that were imposed by the previous Trump administration in March 2018 on certain imports of steel and aluminum from Canada. Canada responded by imposing countermeasures against $16.6 billion of steel aluminum and other products from the U.S. Both countries lifted their tariffs in May 2019.
“No one will benefit from an arbitrary increase in material and product prices. Our countries and supply chains are intertwined and dependent on each other, so nobody wins in a tariff war,” says Lyall.
Canada and Mexico account for nearly 25% of building materials imported into the U.S. Roughly 30% of the lumber used in the U.S. is imported and more than 85% of the imports come from Canada, according to the National Association of Home Builders. Canada is also the largest foreign supplier of steel and a major supplier of aluminum to the U.S., both of which are essential for residential construction. Meanwhile, the U.S. also imports other materials from Canada such as cement, cement products and gypsum used for drywall.
Groups like the Calgary Construction Association believe there could serious consequences beyond just homebuilding, including contractors disengaging from projects or choosing not to bid on essential infrastructure like schools and public facilities. It could also result in owners delaying or postponing projects, causing economic momentum to stall. And provincial leaders have said the tariffs will likely result in hundreds of thousands of people losing their jobs.

“Even if projects return post-tariffs, costs could still escalate, making them more expensive and difficult to complete,” said the group.
The Canadian Construction Association (CCA) recommended proactive measures. For existing contracts, businesses should review their agreements for provisions on price adjustments due to changes in taxes and customs duties, noting that contracts without such provisions may leave contractors liable for increased costs.
For new contracts, the association advises raising tariff concerns early, including duty provisions, and referencing standard industry wording. Contractors may have grounds for cost recovery due to unforeseen expenses or project delays, though this can be challenging without clear contractual provisions.
For some specific industries it could all but wipe them out. Steel officials say the the tariffs as well as Canada’s retaliation is a “doomsday scenario” for them as 99% of Canadian steel exports go to the U.S.
What is Canada doing about it?
Trudeau announced he would impose tariffs on $30 billion worth of imported U.S. goods as soon as Trump’s tariffs begin. A list of these goods includes wood products such as engineered structural timber, plywood, veneering sheets, particleboard, fibreboard, panels, shingles, shakes, posts, and beams.
Also listed are plastic floor, wall, and ceiling coverings; carpets and other textile floor coverings; lavatory fittings; doors, thresholds, windows, frames, shutters, and blinds; large reservoirs, tanks, vats, and other builders’ ware; luminaires and lighting fixtures; as well as furniture and its components.
These tariffs apply only to goods originating from the U.S. They do not affect goods already in transit to Canada as of February 4.
He announced the government also intends to impose tariffs on an additional list of imported U.S. goods worth $125 billion, including steel and vehicles. However these would be subject to a public comment period prior to implementation.
But where it gets more interesting is at the provincial level. Ontario Premier Doug Ford plans to ban all American companies from provincial contracts until U.S. tariffs on Canadian goods are removed. He has already shredded a $100-million contract with SpaceX to deliver high speed internet to remote areas.
In Alberta, Premier Danielle smith called on the federal government and other provinces to “immediately commence a national effort to fast track and build oil and gas pipelines to the east and west coasts of Canada, construct multiple LNG terminals on each coast, increase internal refining capacity, unleash the development of critical minerals, lower taxes, reduce red tape, tear down interprovincial trade barriers and re-empower provinces to develop our unique economies without constant federal interference and imposition of anti-resource development laws.”
Premier David Eby announced he is assessing private-sector projects worth $20 billion with the goal of getting them approved as quickly as possible, and issuing their permits faster. These are expected to create 6,000 jobs in remote and rural communities. In addition, the Province has vowed to support and help implement the actions being taken by the federal government.
“We won’t back down or be bullied into becoming another state,” said Premier Eby. “Our province is unified and resolute. We’ll never stop standing up for B.C. and Canada.”
Government leaders also strongly encouraged people to purchase Canadian products when possible.
