The Impact of the U.S – Canada Trade Tensions on Housing Costs and Affordability

The ongoing trade tensions between the United States and Canada are significantly affecting various economic sectors, with the housing market being one of the most impacted. Recent tariff measures have driven up costs for construction materials, labor, and financing, exacerbating Canada’s existing housing affordability crisis. As both nations continue implementing retaliatory trade policies, it is crucial to analyze how these economic shifts influence the future of the Canadian housing market.

Tariffs and Rising Construction Costs

One of the most immediate effects of the trade dispute is the surge in construction material costs. The U.S. has imposed tariffs on key building materials, such as:

  • Steel and Aluminum: Tariffs on Canadian steel and aluminum have increased costs for roofing, framing, and appliances, further inflating construction expenses.

In response, Canada has levied countermeasures, escalating material prices and supply chain disruptions. These increased costs lead to:

  • Higher prices for newly built homes
  • Increased renovation and maintenance costs
  • Delays in construction due to material shortages

Housing Affordability Challenges

Canada is already facing an affordability crisis, particularly in cities like Toronto, Vancouver, Calgary and Montreal, where home prices have skyrocketed. Trade-induced cost increases only add to these challenges by:

  • Raising mortgage rates – Market uncertainty has led lenders to increase rates, making home loans more expensive.
  • Pricing out middle-class buyers – Rising construction costs push home prices beyond the reach of many Canadians.
  • Driving up rental costs – With fewer people able to buy homes, demand for rental units increases, leading to higher rents.

Real-World Example:

According to the Canadian Home Builders’ Association (CHBA), tariffs and supply chain disruptions have raised the cost of building an average home by $30,000–$50,000. In British Columbia, some developers have halted projects due to material shortages, further tightening housing supply.

Economic Uncertainty and Market Volatility

Beyond direct cost increases, trade tensions introduce broader economic instability. Financial markets react to uncertainty with volatility, affecting interest rates and lending policies. Key economic risks include:

  • Higher borrowing costs: Lenders become more cautious, raising rates and tightening loan qualifications.
  • Potential job losses: Industries dependent on trade, such as construction and manufacturing, may experience layoffs, reducing homebuyer confidence.
  • Decreased consumer spending: Rising costs discourage real estate investment and home renovations.

Policy Responses and Market Adaptation

Governments and industry players are adapting to these challenges in various ways:

  • Canada’s National Housing Strategy (NHS): The government has pledged $70 billion over 10 years to improve housing affordability.
  • Provincial tax credits: Some provinces are offering incentives to counteract rising construction costs.
  • Supply chain diversification: Builders are exploring alternative suppliers to reduce dependency on U.S. materials.

Opportunities Amidst Challenges

Despite these difficulties, some positive trends could emerge:

  • Cooling of overheated markets: Higher costs may slow demand, reducing bidding wars in major cities.
  • Lower fixed mortgage rates: Some lenders are offering competitive rates to attract cautious buyers.
  • Potential policy interventions: Governments may introduce new tax relief programs or subsidies to support homebuyers and developers.

Conclusion

The U.S.-Canada trade tensions are exerting significant pressure on an already strained Canadian housing market. Rising material costs, economic uncertainty, and affordability concerns are making homeownership increasingly difficult. However, strategic planning, government intervention, and evolving market conditions could provide opportunities for buyers and investors willing to navigate the uncertainties.