Some developers warn that impending U.S. tariffs on Canadian steel and aluminum could significantly harm the housing sector by raising the costs of essential construction materials. A trade association representing over 4,000 companies involved in development and renovation expressed concerns that the tariffs might trigger an economic slowdown and reduce investment in residential real estate.

The group’s leadership cautioned that this could deal a "brutal blow" to the housing market and worsen housing affordability. They pointed out that in an environment already affected by low profit margins, high interest rates, and rising input costs, additional cost increases could make builders anxious. The situation was described as creating "chaos" in the development market.

On Monday, U.S. President Donald Trump signed an executive order imposing a 25% tariff on steel and aluminum imports, set to take effect on March 12. Trump has also threatened to impose a 25% tariff on a wide range of Canadian imports, including a 10% tariff on Canadian energy, though he has delayed these actions until at least March 4 in connection with border security commitments.

The concern is that rising construction material costs would push up home prices in Canada, which are already under pressure due to inflation. Costs for materials like lumber increased during the pandemic and have not returned to pre-COVID levels. Reducing U.S. demand for Canadian products could lead to less production, which would, in turn, raise prices domestically.

Additionally, retaliatory tariffs could further drive up costs, as Canada exports about $20 billion worth of steel and aluminum to the U.S. annually. There are fears that if tariffs extended to other construction materials like cement, gypsum, and lumber, costs could skyrocket, making construction projects unfeasible.

While Canadian builders may still be able to construct homes, the rising costs could make them less affordable for many consumers.