U.S. President Donald Trump has already made waves during his inaugural months, imposing duties on Canada and other trading partners, igniting fears of financial instability. Tensions have escalated due to these tariffs, evoking resentment among Canadians who feel betrayed by what was once seen as a close relationship. With nearly 70 percent of Canadians expressing negative sentiments toward Americans because of these trade conflicts, it’s evident the tariffs have shifted perceptions significantly.
The catalyst for this growing trade war stems from Trump's executive order on January 20, 2025, which proposed 25 percent tariffs on goods from Canada and Mexico. His justification was connected to border security needs, particularly concerning illegal drug flows. This order was followed by immediate responses; on the following day, Trump's administration signaled the commencement of consultations on the Canada-United States-Mexico Agreement (CUSMA) and mandated the commerce department to study the impact of these tariffs, with findings expected by April 1.
By February 1, the tariffs were officially signed, set to take effect shortly after. This was met with retaliation from Canada, which announced immediate tariffs on $30 billion worth of U.S. products, emphasizing the tangible repercussions of Trump’s strategy. Canadian leaders and citizens alike were incensed at the abrupt decision, which was perceived as fundamentally undermining decades of trading partnership.
Few would anticipate the scale of turbulence these decisions would create. Even before Trump's tariffs kicked off, Canada faced its own issues with sluggish housing construction and economic growth. According to the Canada Mortgage and Housing Corporation, only 245,000 housing units were built last year—a mere two percent increase from 2023, far below the 400,000 annual requisite to satisfy demand. Disturbingly, Ontario experienced declines, with housing starts dropping by 16 percent compared to the previous year.
Tariffs on steel and aluminum imports could be detrimental to this struggling sector. Canada exports over $35 billion worth of steel and aluminum to the U.S. every year, but now faces the prospect of higher costs and limited availability. For example, where I-beams cost $500 before, they could jump to $750 due to new tariffs. Builders have already expressed their concerns, with expectations of residential development costs increasing by four percent, exacerbated by financing challenges.
Scott Andison, CEO of the Ontario Home Builders’ Association, expressed discontent over the tariffs, stating, “We’re disappointed—not at the manufacturers or suppliers, but at a U.S. administration intentionally launching such hurtful policies.” This sentiment resonates particularly strongly as builders attempt to navigate through already high-risk investments. A mere hiccup could stall projects or escalate housing prices, placing future homeownership even farther out of reach for average Canadians.
Compounding the issue is the governmental rhetoric surrounding the tariffs, dominated by calls for 'buying Canadian'. Builders have started sourcing local materials to mitigate costs. Andison noted, “Our members are already taking the time to find the best prices locally.” Yet, shifting supply chains is neither quick nor easy, and as demand surges for local products, prices are likely to rise—including on basic construction materials such as flooring and steel siding.
On top of frustrations about increased expenses, it’s important to note how these tariffs impact consumers directly during construction or renovations to existing homes. Even as the effects on rental prices may take time to emerge, they’re sure to become evident as renovations—the very backbone of maintaining existing housing—become more expensive.
The Canadian government has proposed several channels to alleviate the crisis, including removing GST and provincial sales taxes on newly-built homes, investing in infrastructure, and fast-tracking development through reduced bureaucratic red tape. Ontario’s Housing-Enabling Water Systems Fund, which has poured nearly $1.3 billion toward the construction of key infrastructure to support housing development, remains one such effort, addressing pressing needs amid the trade spats.
Trump’s assertion of moving forward with tariffs remains firm, as he has announced plans to roll out additional tariffs on steel and aluminum imports, revoking temporary suspensions. Strikingly, on March 11, he stated he would boost tariffs on Canadian exports due to Ontario's recent electricity charges implemented as retaliation against U.S. tariffs, reinforcing the depth of bilateral tensions.
The U.S. response to Canada’s attempts to diversify trade relationships has galvanized patriotism north of the border, prompting Canadian officials at all government levels to seek alternatives to American products or markets. The call for trade diversification seems more urgent than ever, especially as local businesses likely reel under the pressure from elevated tariffs.
Yet, even with the retaliatory pathways Canadian officials are exploring, the repercussions lie woven throughout the fabric of the Canadian economy. Builders’ hesitance around stability and cost raises uncertainties as they determine whether to absorb increased costs or pass them on to buyers—setting the stage for what could be another housing crunch.
Economic analysts remain divided on the long-term impacts of Trump’s heavy-handed tariffs, acknowledging the uncertainty within both Canada and the global markets. While tariffs traditionally aim to correct trade imbalances, this approach raises eyebrows as many suggest it bears more resemblance of pressure tactics rather than constructive trade solutions. Yet, for now, the Canadian housing market grapples with the potential fallout of these tariffs, witnessing the tightening effect of rising costs as it seeks any semblance of normalcy moving forward.