The consequence and cost of tariffs

By Richard Lyall

for On-Site Magazine

Oct. 27, 2026

At a time when Canada and the U.S. are struggling to address severe housing affordability challenges, the tariff war is pushing construction costs in both countries in precisely the wrong direction.

While government leaders on both sides of the border have repeatedly pledged to increase housing supply, lower costs and make homeownership more attainable, escalating tariffs and counter-tariffs on both the residential and ICI construction industry are having the exact opposite effect.

The levies are driving up costs, disrupting integrated supply chains and adding new uncertainty to an industry already under significant strain.

For residential builders, the timing could hardly be worse. Developers are already grappling with persistent labour shortages, elevated interest rates, soaring land prices, development charges and regulatory hurdles. Added to that list is now a new and destabilizing force: tariffs on key construction materials and building components that are essential to housing projects.

The impact is not confined to the residential construction industry. The ICI sector is equally affected.

The latest round of measures illustrates the growing problem.

The U.S. has imposed a 50 per cent Section 338 tariff on billions of dollars worth of Canadian goods. Canada, in turn, has responded with dollar-for-dollar counter-tariffs on hundreds of U.S. products covering roughly $27.6 billion in imports.

Every tariff imposed somewhere in the supply chain eventually leads to higher prices.

That matters because the Canadian and American construction industries are deeply integrated. Canadian builders rely heavily on products sourced from the United States, including structural steel, appliances, HVAC systems, electrical components and elevators. American builders, meanwhile, depend heavily on Canadian lumber and engineered wood products.

Housing construction, for example, is not a self-contained national industry operating within political borders. It is built on a complex web of cross-border suppliers, manufacturers and distributors. When tariffs are imposed on one segment of that network, costs ripple through the entire system.

RESCON estimates that earlier tariff measures had already added between $15,000 and $25,000 to the cost of a new Ontario home. The Sept. 8 counter-tariffs are expected to add another $9,000 to $14,000 to a typical single-detached home and between $18,000 and $28,000 to a mid-rise residential unit as existing inventories are depleted and contracts are repriced.

Those are not insignificant numbers. They represent the equivalent of a down payment for many first-time buyers.

Builders cannot simply absorb the additional costs. Residential construction operates on increasingly thin margins. Developers facing higher financing costs, slower sales and increased carrying expenses do not have the flexibility to absorb tens of thousands of dollars in new costs per unit.

Instead, those costs will be passed directly to buyers and renters.

The list of affected materials is extensive. Tariffs now touch many of the fundamental products used in residential and ICI construction, including structural steel, rebar, steel plate, pipe, tube products, joist hangers, fasteners, nails, screws and bolts. Sheathing products, engineered wood panels, lumber, flooring materials and carpets are also affected.

In addition, tariffs apply to a broad range of manufactured building components such as HVAC systems, elevator equipment and electrical products, as well as appliances. These are not luxury finishes or optional upgrades. They are essential elements of modern housing projects.

For high-rise developments, the impact can be especially severe. Structural steel requirements are substantial, while complex mechanical and electrical systems, elevators and specialized equipment are often sourced through North American supply chains. Every tariff-induced hike compounds throughout the project budget.

The consequences of tariffs extend well beyond individual developments. The outcome is predictable. As costs rise, some projects may not be financially viable. Builders may reconsider future investments, lenders may become more wary and projects may not get built.

The broader economic implications are equally concerning. Tariffs create uncertainty that discourages investment and disrupts long-established commercial relationships. Businesses become more cautious, supply chains become less efficient and economic growth slows.

Every tariff carries consequences. In the end, tariffs do not build factories, hospitals, or new homes. They simply make them more expensive.

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.