The quickly-escalating trade war between the U.S. and Canada will impact lumber and softwood imports and could end up squeezing already-struggling American homebuilders and buyers, experts say. Late last week, talks between the two countries failed to stop steep new tariffs on $20 billion worth of Canadian exports to the U.S. ordered by the Trump administration last month, prompting Canada to retaliate with tariffs as high as 50 percent on a range of goods, starting on September 8. Among the Canadian goods hit by the new round of tariffs are hockey sticks, certain items of clothing, wines, some dairy products, and building materials such as cement and plywood.
Thirty-six different types of plywood are impacted by Section 338 duties imposed by the Trump administration. Canadian lumber is exempt from these most recent 50 percent tariffs, but already receives about a 35 percent tariff from previous levies still in place. These tariffs are putting additional pressure on the U.S. construction sector, which has faced rising costs in recent years and diminishing returns as demand for housing dwindles across the country due to the ongoing affordability crisis.
The National Association of Home Builders (NAHB) has warned that the new tariffs will increase housing costs and slow down construction - hurting both the homebuilding sector and homebuyers. The cost of building materials has risen by 40 percent since December 2020, much faster than the rate of inflation, according to the NAHB. Tariffs imposed by the Trump administration last year have brought prices up, and any further increase would exacerbate homebuilders’ struggles.
This was the highest year-over-year change since December 2022,” a spokesperson for NAHB told Newsweek in a written statement. They added: “While not all of this price increase is directly related to the Canada-US trade relations, we have noticed higher price increases for metal-based products like siding and trim “The U.S. imports a significant amount of aluminum and steel from Canada, which was not exempt from the Section 232’s 50 percent tariff put in place last year. These tariffs are having impacts on derivative home building products that were reliant on imports of aluminum and steel.
Canadian softwood lumber faces a tariff of 45 percent just to cross the border since last November.” Lumber imports into the U.S. are on pace for their lowest level since 2014 in terms of quantity imported to the U.S., according to NAHB. Based on the latest 338 tariffs, the impacts on homebuilding directly “will be seen in plywood, veneer and engineered wood products,” NAHB said, adding: “While Canada might not have a large share of imports, they are still an important supplier to the U.S. of some of these home building materials.” Cost increases could sway developers from building new homes, or as many as they would have would materials have been cheaper - with disastrous consequences for the country’s housing market. She said: “If it’s able to catch up at all.
Markets do adapt and buyers can find workarounds, but that’s slow grind and it means higher costs are the base case for the foreseeable future.” First-time homebuyers, who have struggled with reduced affordability across the U.S. since the pandemic, “will probably take the biggest hit” from the new tariffs on Canadian imports, according to Fairweather. That is because “they’re the ones counting on that new construction inventory to get their foot in the door,” she explained. Existing homeowners who are locked into a low mortgage rate are “more insulated” from new tariffs, while renovators “will absorb the brunt of the cost increases in the short term,” Fairweather noted.
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