[ad_1]
Late British Prime Minister Winston Churchill once famously declared, “Those that fail to learn from history are doomed to repeat it.”
Fasten your seatbelt. It seems we are headed down a familiar destructive path.
I’m talking about the across-the-board tariffs that have been imposed on Canada by the administration of U.S. President Donald Trump. They will have a significant impact on the residential construction and renovation industry on both sides of the border. There will be no winners – only losers, as our supply chains are interconnected.
If history has taught us anything, it is that tariffs don’t work. For example, levies imposed as a result of the anti-trade Smoot-Hawley Act of 1930 sparked a devastating trade war between the U.S. and other countries and lengthened and deepened the misery of the Great Depression. No country benefits from a tit-for-tat trade conflict. One tariff merely begets another until we are in a full-blown trade war.
We are already in the midst of a housing supply crisis as builders can no longer build housing that people can afford. At this stage, the residential construction industry needs stability and certainty, not more chaos. Added costs that will be imposed on the residential construction industry as a result of the tariffs couldn’t come at a worst time. Housing supply has already been hammered by exorbitant taxes, fees and levies, and excessive bureaucracy and red tape. Tariffs will disrupt supply chains and construction materials will cost more. The U.S. National Association of Home Builders shares our view that tariffs will be bad for American builders. They will raise homebuilding costs, deter new development and frustrate efforts to rebuild in the wake of natural disasters. Ultimately, consumers will pay for these tariffs in the form of higher home prices.
Our supply chains are intertwined. Think back to the 2021 ice storm that knocked out power in Texas. The carnage resulted in a shortage of windows that meant homes here could not be finished. The U.S. imports large amounts of steel, aluminum, lumber, cement and gypsum for use in construction. Canada exported 6.56 million tons of steel to the U.S. in 2024, and we accounted for 56 percent of aluminum imports to the U.S. in 2023, according to a Morgan Stanley study. Roughly 30 percent of the lumber used in the U.S. is imported and more than 85 percent of those imports come from Canada. Conversely, the Canadian residential construction industry relies on materials imported from the U.S. such as plywood, glass, metal fittings, light fixtures, ceramics, electrical parts, and plumbing and mechanical components. Reciprocal tariffs will raise prices for those goods. Tariffs will also lead to a dramatic shift in supply chains in both countries. Canadian builders will likely seek alternative sources for materials, such as domestic and foreign producers. These shifts will cause project disruptions as supply chains are adjusted.
The result?
Prices for new homes as well as rentals will rise on both sides of the border due to supply problems. Some construction projects will grind to a halt because they’ll no longer be economically viable. Moreover, the ripple effect of higher material and housing costs will lead to broader inflation.
The residential construction industry, like many others across the country, have been preparing for the impact of tariffs. RESCON has joined a steering committee of the Canada United States Trade Council, a coalition that will be providing governments guidance on trade issues facing Canada. We have strongly condemned the imposition of tariffs as there will be no winner. Indeed, both Americans and Canadians will feel the economic pain. To exemplify, the budget lab at Yale figures that tariffs will raise prices in the U.S. and cost families between $1,900 and $7,600 a year.
To soften the blow, RESCON is calling for regulation and internal barriers between provinces and territories to be removed to make it easier to move goods and services across Canada. Eliminating domestic hurdles could offset the cost of tariffs and add $200 billion to the Canadian economy. Federal and provincial leaders of all political stripes are increasingly on board with this strategy.
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. and both countries lifted their tariffs in May 2019.
I am hopeful that, in the end, cooler heads will prevail, and the tariffs will be lifted. It is an ill-conceived, high-risk gamble that will only cause chaos and higher prices. Using tariffs as a hammer will only backfire.
Richard Lyall is president of the Residential Construction Council of Ontario (RESCON). He has represented the building industry in Ontario since 1991. Contact him at me***@****on.com.