Impact of tariffs on housing and forestry: A deep connection
By Richard Lyall
for Canadian Forest Industries
Aug. 24, 2026
For decades, the housing and forestry industries have been two of Canada's most important economic engines. They are also deeply interconnected. When one sector thrives, the other benefits. When one weakens, the consequences ripple throughout the supply chain - and economy.
That is why the latest round of U.S. tariffs on Canadian lumber and forest products are so concerning. They should concern policymakers, builders and communities across the country. We are all in this together.
Much of the discussion has focused on whether tariffs will make homes more expensive. In the United States, the answer is a resounding yes. In Canada, however, the situation is more complicated. The tariffs - combined with longstanding anti-dumping and duties on Canadian softwood lumber - will almost certainly weaken two industries that are already under significant strain.
In the U.S, the impact on the housing market is relatively straightforward. America imports a significant portion of the softwood lumber it consumes. Canada supplies the vast majority of those imports. The result? Tariffs will increase the cost of lumber entering the U.S. market, raising construction costs for homebuilders and dramatically increasing the price of new homes.
The National Association of Home Builders has warned that tariffs will only make building materials more expensive and worsen affordability challenges.
In Canada, the situation is more complex.
On one hand, there may be a modest benefit for builders if some lumber that would normally be exported south of the border remains in Canada. As inventories build, lumber prices could soften. However, the decline in lumber prices would have only a marginal impact on the cost.
Lumber is only one component of the cost of building a home. Affordability problems are driven far more by land costs, taxes, development charges, financing expenses, municipal fees and regulatory delays. Presently 36 per cent of the cost of a new home is due to the tax burden.
The greater concern is the broader effect that tariffs would have on Canada's economy and investment climate.
If tariffs suppress Canadian exports and slow economic growth, the consequences could include lower business confidence, weaker investment and slower job creation.
The residential construction industry is already contending with weak new-home sales, high financing costs and difficult project economics across many Ontario markets. More economic uncertainty could translate into fewer housing starts, delayed developments and reduced private-sector investment.
But the real damage is likely to occur in the forest products industry.
Canadian forestry companies are already operating under a heavy burden of trade restrictions. Industry analysts report that increased duties have contributed to reduced exports, lower production levels and continued pressure on mill operations.
Fastmarkets, a data and forecasting company, reports that after duties more than doubled in summer 2025, exports to the U.S. dropped significantly and Canadian lumber production declined eight per cent.
The likely outcomes are all-too familiar and troubling: shift reductions, mill curtailments, temporary shutdowns and delayed capital investment. Those consequences extend far beyond sawmills, affecting forestry supports such as truckers, rail companies, equipment suppliers, contractors and countless small businesses that depend on a healthy resource economy.
Northern Ontario is particularly vulnerable. Many communities depend heavily on forestry-related employment, and a large share of Ontario's forest-product exports are destined for the U.S. market. When mills reduce production, the impact is felt throughout entire regional economies.
There is also a strategic concern. For years, Canada has worked to move beyond simply exporting raw lumber by expanding the production of higher-value products such as plywood, particleboard, fibreboard and engineered wood. Tariff expansion into these product categories threatens investment in precisely the kinds of value-added manufacturing that policymakers have been encouraging.
Residential construction is the largest end market for many wood products. When housing starts fall, demand for lumber, panels and engineered wood declines. Logging activity slows. Transportation volumes drop. The ripple effects move quickly through the entire supply chain.
In effect, Canada faces a potential double hit. While tariffs would reduce demand from Canada’s largest export market and affect the domestic forestry and wood products industries, hey would also dampen out economy and investment climate and ultimately affect housing.
For Ontario especially, the challenge is significant. Residential construction and forestry are pillars of the provincial economy. When both are under pressure at the same time, the effects spread well beyond construction sites and sawmills.
The U.S. tariffs, then, are not simply a trade issue. They are a serious threat to the residential construction, forestry and wood products industries in Canada as well as the homebuilding industry in the U.S.
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 media@rescon.com.