The Impact of U.S. Tariffs on the Canadian Real Estate Market

On March 4, 2025, the U.S. government enacted broad new tariffs on Canadian imports, including a 25% duty on most goods and a 10% tariff on oil and energy products. In response, Canada imposed retaliatory tariffs on $20 billion worth of U.S. goods, with additional tariffs on $85 billion more expected. While headlines focus on trade and politics, the Canadian real estate market is already feeling the ripple effects.

The Economic Fallout: Rising Costs and Slower Growth

Roughly 75% of Canadian exports go to the U.S., so any disruption to this trade relationship hits the economy hard. Canadian manufacturers and importers are now facing higher costs, and this is trickling down to consumers and business sectors, including real estate. The Bank of Canada is watching closely, with analysts predicting possible interest rate cuts in Canada to support economic stability and meet the 2% inflation target.

Tariffs and Housing: A Cost Crisis for Builders

Canada’s housing market is already strained by a 7 million-unit supply shortfall. Now, tariffs are threatening to push construction costs even higher.

The biggest impact is on steel and aluminum, where total duties on some products have effectively reached 50%. These are foundational materials in home construction, used in framing, roofing, HVAC, and infrastructure.

Key Impacts on Construction:

• Increased cost of materials like steel and aluminum

• Delays due to stockpiling and purchasing challenges

• Financial strain for developers and builders

• Potential rise in home prices by $7,500 to $10,000 per unit

Interest Rates: Relief or Red Herring?

The Bank of Canada’s interest rate cuts are aimed at preventing a broader recession. Lower mortgage rates can make homebuying more accessible in theory, but in practice, the rising cost of new builds and a lack of supply continue to make real estate affordability in Canada a major challenge.

Buyers may find cheaper financing, but higher property prices due to materials and delayed construction may cancel out those benefits.

Real Estate Developers Face Difficult Decisions

With building costs increasing and uncertainty in the trade environment, developers are re-evaluating project feasibility. Some are postponing projects, shifting from detached homes to multifamily builds, or exploring modular construction as a cost-saving strategy.

Investors and developers are also increasingly looking to secondary real estate markets in Canada where land is more affordable, and municipalities may offer faster zoning approvals.

What’s Ahead for Canadian Real Estate?

As of mid-2025, economists forecast slower home price appreciation and continued constraints on affordability. While real estate remains a strong long-term investment, the landscape is shifting:

• Expect continued cost increases in new construction

• Rate cuts may soften the impact but won’t solve affordability

• Builders and investors must adapt to economic uncertainty and supply chain pressures

Canada’s real estate sector is caught in the crosshairs of a larger trade battle. As tariffs reshape construction economics, all eyes are on how policymakers will respond to protect affordability and encourage supply. Whether you're a homebuyer, investor, or developer, understanding the link between trade policy and real estate trends in Canada is essential for navigating the market in 2025.

Sources:

• Reuters

• Reuters

• AP News

Published: March 2, 2025

By Private Lending Queen

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