US homebuilders face soaring costs from Trump’s Canada tariffs | Daily Hive

US homebuilders brace for soaring construction costs due to Trump tariffs on Canada

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While the effects of US President Donald Trump’s 25% tariffs on a sweeping range of Canadian imports are widely discussed, their impact on Americans is often overlooked, especially by policymakers south of the border.

According to the signed executive orders on Saturday, the new duties on Canadian goods entering the United States will be fully in force by Tuesday, February 4, 2025.

Coordinated between the Canadian federal and provincial governments, Canada will retaliate with its own tariffs on select American goods starting on the same day, with an initial tariff on $30 billion worth of goods targeting orange juice, peanut butter, alcohol, coffee, appliances, apparel, footwear, motorcycles, cosmetics, and pulp and paper.

Later in February, a second phase of retaliatory tariffs on American goods worth $125 billion could be rolled out, such as on beef, pork, dairy products, certain fruits and vegetables, passenger vehicles, trucks and buses, and steel and aluminum products.

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In a letter addressed to Trump on Friday, just prior to the signing of the tariff executive orders, the US National Association of Home Builders (NAHB) warns the 25% tariffs on both Canada and the United States “will have the opposite effect” of Trump’s inauguration day executive order that “seeks to increase housing supply and affordability.”

Due to the previous pandemic-induced impacts, home construction costs in the US have already soared by over 30% in recent years.

The association states the tariffs will result in the further “slowing down [of] the domestic residential construction industry.”

“Our sector relies heavily on a diverse and cost-efficient supply chain for building materials such as lumber, steel, gypsum, and aluminum,” reads the letter, noting that American builders rely on components produced abroad, with Canada and Mexico representing nearly 25% of US building materials imports.

“Imposing additional tariffs on these imports will lead to higher material costs, which will ultimately be passed on to home buyers in the form of increased housing prices. Further supply chain disruptions from increased tariffs coupled with increased demand for materials could also hinder rebuilding efforts in areas affected by natural disasters, which you have pledged to help rebuild as quickly as possible,” continues the letter.

In a news release on Friday that accompanies the letter, the NAHB also highlighted that over 70% of the imports of softwood lumber and gypsum (materials for drywall) — two essential materials for home construction — come from Canada and Mexico, respectively.

The association has requested Trump to make a tariff exemption for critical construction materials.

“Tariffs on lumber and other building materials increase the cost of construction and discourage new development, and consumers end up paying for the tariffs in the form of higher home prices,” said Carl Harris, chairman of NAHB, in a statement.

“NAHB urges the administration to reconsider this action on tariffs and we will continue to work with policymakers to eliminate barriers that make housing more costly and prevent builders from boosting housing production.”

Prior to the Trump’s blanket tariffs, there was already a longstanding dispute on softwood lumber between both countries, with the US hiking its tariff on Canadian softwood lumber from 8% to 14.4% in August 2024.

Trump’s new 25% tariffs, combined with the existing 14.4% tariff on Canadian softwood lumber, could raise total duties on these specific products to nearly 40%.

For decades, the US has accused the Canadian government of subsidizing its lumber industry, resulting in the import of lower-priced softwood lumber that unfairly puts American producers at a disadvantage. British Columbia is particularly affected, as its lumber products typically account for roughly a quarter of exported commodity value.

“The Canada-US lumber trade is mutually beneficial. American demand exceeds domestic supply-requiring US builders to import about 30% of their lumber needs,” reads a statement by BC Lumber Trade Council (BCLTC) on Saturday in reaction to Trump’s executive order.

“Canadian producers fill most of this gap, ensuring a stable, predictable supply of quality lumber. Tariffs disrupt this essential supply chain, increasing building material costs, at a time when affordability is already a major concern for American families.”

Canada’s share of the US lumber market is now smaller than it was when the Canada-US Softwood Lumber Agreement was signed in 2006.

According to Fastmarket in 2024, US domestic softwood lumber production — especially in the US South — is surging in the backdrop of a recent wave of Canadian sawmill closures, particularly in BC, due to macroeconomic shifts in demand coupled with the previously targeted tariffs on Canadian softwood lumber imports.

“The growing US share of the North American lumber market has been a secular trend driven ultimately by lower fiber costs in the rapidly growing US South but also accelerated by duties and managed trade for Canadian sawmills as well as the long-term consequences of the mountain pine beetle kill in British Columbia. This is a noteworthy development considering that historically, Canada has accounted for anywhere between a quarter to a third of US softwood lumber consumption,” reads the Fastmarket’s commodity report.

In 2024, North America saw its sawmill capacity drop by 4%, with over 40% of these losses situated within BC.

Some of the largest sawmill shutdowns in recent memory occurred in September 2024, when Canfor Corporation announced the closure of of its Plateau and Fort St. John operations due to “persistent challenge accessing economic fibre, ongoing financial losses, weak lumber markets, and increased US tariffs.” Both closures impacted about 500 employees in these small communities in northern BC, and removed 670 million board feet of annual production capacity.

Additionally, West Fraser Timber Company, Western Forest Products, and Interfor Company have also suspended or shut down various operations in Western Canada.

According to BCLTC, as of 2023, about 85% of BC’s softwood lumber production is exported to international markets, with about 65% of production exported to the US, almost 20% to overseas markets such as China, Japan, South Korea, and Indian, and 15% sold within Canada.

Moreover, in recent years, BC lumber exports to China have dropped substantially from over four billion board feet annually just over a decade ago — a surge that was a part of Canada’s previous strategy to diversify its lumber exports beyond US markets — to about 650 million board feet in 2023. This decline is due to a combination of China’s weakened economy and housing sector, and political and economic tensions.

In 2022, the logging industry contributed about $17 billion to BC’s provincial gross domestic product, and provided $6.5 billion in revenues for all three levels of government.

The lumber industry in BC supports over 100,000 direct, indirect, and induced jobs in BC, paying $9.1 billion in wages, salaries and benefits, according to BCLTC. Furthermore, the province’s lumber industry represents one-in-28 of all BC jobs and one-in-six manufacturing jobs.

BC’s provincial government estimates as many as 124,000 jobs could be lost in the province over the coming years if the 25% blanket tariff runs through 2028 — the entire duration of the Trump presidency. The largest job declines would be experienced in the natural-resource sector export industries and associated manufacturing, as well as in the transportation and retail sectors. In contrast, the total number of COVID-19-related job losses by June 2020 — three months into the pandemic — was 235,000.

To mitigate the major impacts of the tariffs on small communities in BC, especially those that are currently dependent on the natural resource-based industries, the provincial government announced on Saturday that it will fast-track the approval of $20 billion worth of private-sector projects, creating 6,000 jobs in remote and rural communities.

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