Tariffs are driving up homebuilding costs

By Richard Lyall

for Canadian Forest Industries

Sept. 16, 2026

At a time when both Canada and the U.S. find themselves struggling with severe housing affordability challenges, the last thing we need is a trade war that drives up the cost of building homes.

Yet that is precisely where we find ourselves today. The escalating tariff battle between the two closest economic partners in the world will only make the housing crisis worse. There will be no winners.

I should be clear that this is not a criticism of the Canadian government's decision to respond to U.S. tariffs. Indeed, faced with substantial U.S. tariffs, Canada had little choice but to act. No sovereign nation can simply stand aside while key industries are targeted by punitive trade measures.

However, that does not make the situation desirable.

The reality is that tariffs and counter-tariffs are raising costs, disrupting supply chains, slowing housing construction, and making homeownership even less attainable for everyday families. The exchange will not lead to more homes being built. It will only make them more expensive.

A report done by RESCON estimates that the Sept. 8 measures add $9,000 to $14,000 to the cost of a typical Ontario single-detached home and $18,000 to $20,0000 to a mid-rise unit. That’s in addition to the $15,000 to $25,000 load that Ontario homes were already carrying from measures imposed in March 2025.

The numbers are difficult to ignore. For Ontario builders, the practical effect of the tariffs is a substantial hike in the delivered cost of residential inputs sourced from the U.S.

Builders cannot absorb increases of that magnitude indefinitely. Costs will be passed on to homebuyers and renters, further worsening affordability at a time when housing costs are already stretching families to their limits.

This is not a uniquely Canadian problem.

American builders are experiencing the same challenges. The U.S. relies heavily on Canadian lumber and engineered wood products, while Canadian builders depend on American steel, appliances, HVAC systems, electrical components, elevators, and manufactured goods.

The two countries are deeply integrated economically, particularly in the construction sector. When one side imposes tariffs, costs rise throughout the entire supply chain, eventually finding their way into the price of housing.

The outcome is predictable: fewer housing starts, slower construction activity, reduced supply, and higher prices.

In Ontario, early modelling already suggests significant economic damage from escalating trade barriers. Industry estimates point to potential declines in residential construction activity and the loss of thousands of construction-related jobs if tariff pressures remain in place.

At a moment when governments are desperately searching for ways to increase housing supply, the tariff war is moving in exactly the opposite direction.

Tariffs and counter-tariffs inflict damage on both economies. They are not prosperity measures.

A recent report prepared for the Canadian American Business Council by Oxford Economics underscores just how high the stakes have become.

The report concludes that the United States and Canada have built one of the most successful and integrated economic partnerships in the world, generating prosperity through interconnected supply chains and cross-border investment. Yet tariffs and counter-tariffs have disrupted these longstanding commercial relationships and introduced significant uncertainty into future investment decisions.

The economic consequences could be enormous.

A complete breakdown of the U.S.-Mexico-Canada Agreement (USMCA) could result in cumulative economic losses reaching (U.S.) $1.4 trillion in the U.S. and (Cdn.) $523 billion in Canada. The damage would come through reduced trade, lower investment, slower productivity growth, business uncertainty, and job losses.

By contrast, a successful renegotiation and strengthening of the USMCA would generate substantial gains for both countries.

An improved agreement could add (U.S.) $432 billion to American GDP and (Cdn.) $253 billion to Canadian GDP over the next decade while supporting tens of thousands of additional jobs on both sides of the border.

The findings reinforce a simple but important point: co-operation creates prosperity, while trade wars create costs. The two countries would be better off negotiating a stronger and more modern USMCA.

Tariffs are not the answer.

The U.S. and Canada now stand at a precipice. Neither can solve its housing crisis by making construction materials more expensive. Neither can build more homes by disrupting supply chains.

The right path then is not higher tariffs. It is greater economic co-operation, a renewed USMCA, and free and fair trade that helps both nations build stronger economies and, ultimately, more affordable homes.

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.