From Steel to Structure: How Trump’s Tariffs Are Changing the Cost of Building Homes

Published on 15 February 2025, 06:48:32 PM

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The global economy has been rocked by shifting trade policies, and Canada is feeling the impact—especially in its real estate market. The latest wave of U.S. tariffs imposed by President Donald Trump has left homeowners, builders, and investors questioning what’s next. With steel, aluminum, and lumber tariffs at the center of the storm, the ripple effects are reaching Canadian construction costs, housing supply, and overall affordability.

Background: The Tariffs and the Chaos

During his presidency, Donald Trump introduced tariffs on Canadian steel and aluminum (25%), sparking tension between the two countries. This move was intended to protect American manufacturing but may lead to increased costs for Canadian industries, including real estate development, which relies heavily on US imports. Indeed, RBC estimates a 3.4 – 4.2% hit to Canada’s GDP if these tariffs are sustained.

How This Affects the Canadian Real Estate Market

  • Increased Construction Costs: With key building materials facing higher import costs, developers are passing these expenses onto buyers. Expect higher home prices, especially in provinces like Ontario, BC, and Alberta, where demand is already strong in major metropolitans. At the same time, concerns about tariffs could make buyers hesitant, potentially causing a surge in inventory and leading to softer prices, especially as we’re still in winter—a traditionally slow time for real estate. The next few weeks are crucial; if tariffs are reinstated, sellers may panic, causing prices to drop.
  • Supply Chain Disruptions:  Builders are dealing with delays in materials, leading to slower project completions and a tighter housing market.
  • Investment Uncertainty:  Investors may be hesitant to commit to long-term projects when future market conditions, including tariffs, remain unpredictable. This unpredictability makes it difficult for investors to accurately project expenses and returns on investment. For example, a real estate developer might have initially estimated the cost of constructing a new building based on current material prices, but if tariffs increase unexpectedly, these projected costs could quickly balloon, affecting the project’s profitability or even making it financially unfeasible.
  • Rental Market Pressures: Long term, with fewer new homes being built and prices climbing, rental demand may surge, potentially driving up rental costs across major cities. The ripple effect could also push people to seek housing in neighboring cities or towns, driving up rental prices in these areas as well.

What’s Next for Homeowners & Investors?

While the pause on some tariffs brings temporary relief, it’s unclear how long this will last. If tariffs resume, costs could spike further, making it even more expensive to build, buy, or renovate homes in Canada. For those in the market, staying informed about trade policies and their economic impact is key. Whether you’re buying a home, investing in property, or planning a new development, keeping an eye on material costs and trade negotiations will be crucial.

Final Thoughts

Trump’s tariffs—and the uncertainty surrounding them—are reshaping the Canadian real estate landscape. With construction costs fluctuating and investment risks rising, staying ahead of the latest developments is more important than ever. For expert insights on how economic trends affect your real estate decisions, check out axesslaw.com/blog.