Tariff threats are throwing the market into turmoil and weighing against construction industry confidence
The threat of US tariffs is continuing to cast a long shadow over homebuilder sentiment in Canada – and the ongoing turmoil in the lumber market isn’t helping either, with Canadian sawmills gripped by uncertainty and the prospect of potentially severe levies.
Builder confidence barely shifted in 2025’s second quarter compared with Q1 on both the single- and multi-family sides, according to the Canadian Home Builders Association (CHBA), whose latest housing market index (HMI) showed continuing pessimism in the construction industry.
“Extremely high” construction costs are a leading reason for that negative outlook, the association said – and there were further worrying developments on that front last week with a decision by the US government to hike anti-dumping duties on Canadian softwood lumber.
The US’s aggressive stance on Canadian imports means there’s “no good news” in the lumber market at present in Canada, according to wood market expert Russ Taylor (pictured top).
He told Canadian Mortgage Professional the trade war’s unpredictability, and the constantly hovering threat of further charges on Canadian goods, had caused trepidation among British Columbia sawmills about the levies their product could ultimately face.
The Trump administration’s August 1 deadline is rapidly approaching for a deal to be struck before a new tariff wave – but its lumber duties are separate from those plans, and fresh tariffs on construction materials could be imminent.
The August 1 deadline imposed by US president Donald Trump for countries to strike a tariff deal is looming – but Canada’s trade team is signalling that negotiations may take more time.https://t.co/kDRO7qmopI
— Canadian Mortgage Professional Magazine (@CMPmagazine) July 29, 2025
New levies could pummel Canada’s homebuilders
More tariffs on Canadian exports would likely have a spillover effect, weakening Canada’s sawmills and harming the construction outlook.
“Canadians are certainly going to be facing a lot of potential constraints going forward, and a lot of companies are saying, ‘While we’re planning a lot of scenarios for what could happen, we don’t know what’s going to happen – but it could be many things,’ and that’s what everyone’s waiting for,” Taylor said.
“So it’s going to be a bit of chaos trying to figure out how you’re going to export lumber and maybe other wood products to the US under these tariffs.”
That spells further gloom for the Canadian construction picture – much of which has emerged solely because of the trade war launched by US president Donald Trump shortly after he took office in January.
“Interest rates coming down over the past year, previous policy moves, the absence of trade wars, and the quick implementation of GST rebates for first-time buyers, would have likely all contributed to a modest recovery in sales conditions this year,” CHBA said in its report, “relative to the conditions seen over the past two years.”
Are even more lumber tariffs on the way?
In March, the US government initiated a Section 232 investigation into lumber imports, with that investigation aiming to determine whether foreign imports are harming the US wood products industry and national security.
Secretary of Commerce Howard Lutnick, who must consult with other agencies about those factors, is required to report findings and recommendations to Trump within 270 days. The president can then decide whether to take action, including the imposition of further tariffs.
That could mean another hurdle for Canada’s lumber producers to overcome, Taylor said, in addition to the existing softwood levies. “As soon as the duties are in, that’s part one,” he said.
“Part two is probably the 232 tariffs once they come in. But maybe Canada and the US have a deal by that time. So when we know what the rules of the game are, we can go forward. But that’s probably going to be a couple of months away.”
All that points to a continuing lack of clarity in the short term for homebuilding in Canada, although national housing agency Canada Mortgage and Housing Corporation (CMHC) has highlighted how the trend will vary from region to region this year.
Construction “will generally stay strong in Atlantic Canada, the Prairies and Quebec,” the agency said in its latest housing market update – but BC and Ontario are set to see starts fall “sharply” because of high prices, sliding investor confidence and spiking construction costs.
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