The escalating trade conflict between the U.S. and Canada is affecting vital imports like lumber and softwood, which may exacerbate challenges for American homebuilders and buyers. Recent negotiations failed to prevent significant tariffs on $20 billion worth of Canadian exports imposed by the U.S. administration. Canada has retaliated with tariffs reaching up to 50% on a range of goods, starting September 8.
The goods affected include hockey sticks, clothing, wines, certain dairy products, and construction materials such as cement and plywood. Although Canadian lumber is not subjected to the latest 50% tariffs, it remains under previous tariffs of about 35%.
Joel Berner, senior economist at Realtor.com, remarked that tariffs on home construction elements like plywood and cement are causing rising costs in the construction sector amid an ongoing affordability crisis. The National Association of Home Builders (NAHB) has alerted that these tariffs may elevate housing costs and slow construction, negatively impacting both builders and buyers.
“Tariffs are adding thousands of dollars to the cost of building a home precisely when many are already financially strained,” explained Daryl Fairweather, chief economist at Redfin.
Since December 2020, building material costs have increased by 40%, overshadowing inflation, according to NAHB. The Trump administration’s tariffs have contributed to this rise. The NAHB stated that prices for building materials escalated by 5% in July compared to one year ago, marking the highest yearly change since December 2022.
The U.S. continues to import aluminum and steel from Canada, which faced a 50% tariff under Section 232. These tariffs are influencing prices for construction products reliant on these materials. Canadian softwood lumber imports are also affected by a 45% tariff.
The reduced import levels of lumber into the U.S. are expected to impact homebuilding, mainly in plywood, veneer, and engineered wood sectors. The NAHB noted that Canada remains a crucial supplier for certain building materials.
Increased costs may deter developers from constructing new homes, potentially worsening the U.S. housing market. Joel Berner pointed out the persistent housing shortage and the necessity to increase construction, emphasizing the complexity tariffs introduce to planning projects.
“Years of underdevelopment have persisted, and each home not built translates to increased competition for existing properties,” said Fairweather.
Experts emphasize that the U.S. cannot easily replace Canadian materials. Domestic mills lack the immediate capacity to compensate for one-third of the country’s lumber needs. According to Fairweather, it would require years and significant investment to expand domestic supply.
First-time homebuyers, already grappling with affordability concerns, may bear the substantial effects of tariffs on Canadian imports. These buyers rely on new construction to enter the market. Existing homeowners with low mortgage rates are somewhat shielded, but renovators will encounter increased costs in the short term.
Markets with rapid growth in the South and West may face the harshest impacts, while slower-growing areas depending on home resales will be less affected. Berner indicated that new construction is particularly crucial in the Midwest and Northeast, where activity and premiums for new homes highlight an urgent need.
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