Ontario Construction News staff writer
Canadian Foreign Affairs Minister Mรฉlanie Joly has confirmed that Canada will implement retaliatory tariffs against the United States.
Tariffs will be placed on U.S. goods including steel and aluminum, orange juice, peanut butter, wine, coffee and vehicles, in response to U.S. President Donald Trump’s decision to place 25 per cent tariffs on most Canadian imports and 10 per cent on energy, starting Tuesday.
Canada is โfully prepared to impose tariffs on up to $155 billion worth of American goodsโ in response to U.S. tariffs that President Trump says will be imposed Tuesday.
“Letโs be clearโwe are ready,โ Joly said. โWe are ready with $155 billion in tariffs. With a potential recession on the horizon for the US, this is only going to speed up our potential economic fall.โ
Joly was speaking to reporters after U.S. President Donald Trump said Monday tariffs would go ahead as announced on Tuesday.
โTomorrow โ tariffs 25 per cent on Canada and 25 per cent on Mexico. And thatโll start,โ Trump told reporters in the Roosevelt Room on Monday. โTheyโre going to have to have a tariff.โ
Trump has said the tariffs are to force the two countries to step up their fight against fentanyl trafficking and stop illegal immigration. However, he also said he wants to even the trade imbalance with both countries as well and push more factories to relocate in the United States.
Trump has also threatened 25 per cent tariffs on steel and aluminum imยญports, set to begin on March 12, with additional tariffs on auto parts, semiยญconductors, and pharmaceuticals exยญpected as early as April 2. The uncertainty surrounding these trade policies is putting pressure on Canadaโs economy, particularly in the construction sector.
Homebuilders in Canada warn that these tariffs could further disrupt an already strained housing market.
The Ontario Home Builders’ Association (OHBA) described the tariffs as “extremely concerning”. While the effects are not yet clear, they will almost certainly result in severe repercussions for Ontario’s housing sector, the association said in a statement issued just after the tariffs were imposed at Midnight.
The risk of a resulting economic downturn is significant. As a result, the OHBA is concerned that there will be fewer housing starts, ongoing projects will be halted, and completed projects will struggle to close. Even the threat of tariffs over the last couple of months has already created considerable uncertainty and hurt the industry. With housing starts in Ontario down 16% in 2024, these tariffs are effectively pulling the rug out from under the housing sector.
“I spoke to a builder recently who sold two houses in all of 2024. The market is already in a bad place, and there’s no saying how bad the fallout from this additional threat will be,” OHBA CEO Scott Andison said in the statement. “Builders across the province are struggling to survive, and this unwarranted act of economic aggression is going to be even more devastating for them.”
The economic uncertainty around tariffs will lead investors to be extremely cautious before starting any new projects, which means the progress made towards increasing supply in recent years will be eroded. And where available financial capital cannot get a reasonable return, it usually flees the jurisdiction. This would not be good for Ontario or Canada.
Construction costs will likely increase as Canadian suppliers struggle to replace their US customers, counter tariffs raise costs on key imports, and the Canadian dollar depreciates. This will only exacerbate the challenges the residential construction industry is facing and further deter builders and developers from pursuing new housing projects.
“Housing starts were already significantly down in 2024; this means more projects go unsold, get converted to rentals, or stop construction and go into receivership,” explained Andison. “We may be looking at a prolonged slump for the housing sector as a result of these tariffs.”
With some municipalities, like Guelph and Brantford, reporting decreases in housing starts at or above 60%, the effects of these tariffs are certain to impact some housing markets more than others.
OHBA will continue to work with the provincial government to attempt to minimize the impact of these tariffs on the residential construction industry and housing affordability. However, the potential exists for the impact of tariffs on housing to be devastating
The Canada Mortgage and Housing Corporation (CMHC) released its housing starts report for January, showing a 3 per cent year-over-year increase in new housing construction. The growth was driven mainly by an 8 per cent increase in multi-unit starts, especially in Quebec and British Columbia, where purpose-built rental projects are seeing significant growth.
However, Tania Bourassa-Ochoa, CMHCโs deputy chief economist, warned that trade risks tied to U.S. tariff policies add significant uncertainty to the housing market. “While early signs of growth in housing starts are encouraging, trade risks introduce significant uncertainty,” she said. Bourassa-Ochoa also highlighted that CMHCโs most recent Housing Market Outlook predicts a slowdown in housing starts from 2025 to 2027, mainly due to a decline in condominium apartment construction.
The looming threat of up to 25 per cent tariffs on Canadian exports to the U.S. could have serious repercussions for Canadaโs economy. These include investment uncertainty, a weaker Canadian dollar, lower export revenues, job losses, and higher inflation, all of which could increase the risk of a recession by 2025.
In January, the six-month trend in housing starts showed a 2.5 per cent decline to 236,892 units, according to CMHC. The monthly seasonally adjusted annual rate (SAAR) of housing starts for all areas in Canada rose 3 per cent in January, reaching 239,739 units, compared to 232,492 in December.
Despite these economic headwinds, there are signs that the housing market could improve in 2025. Lower mortgage rates and adjustments to mortgage rules in 2024 are expected to unlock pent-up demand from buyers previously priced out of the market. However, some of these homebuyers may face longer loan terms and higher interest costs as home prices continue to rise.
The demand for housing is largely driven by millennials, many of whom are first-time buyers. With remote work declining, this demographic is expected to prioritize proximity to job centres, which could boost demand in larger urban markets.
Repeat homebuyers are also expected to return, taking advantage of lower mortgage rates or facing mortgage renewals from properties purchased during the pandemic. This will further drive sales activity.
However, the recovery in the housing market is expected to be uneven. The condominium apartment market, especially in areas dependent on investor activity, is expected to lag behind. Investors who purchased pre-construction units to rent out are now facing rising costs that outpace rental income, prompting some to sell. This trend is expected to contribute to an increase in listings, particularly as new condominium completions reach record highs in 2025.
Home prices are forecast to rise in 2025 due to increased demand for ground-oriented homes, before slowing in 2026 and 2027. By 2027, much of the pent-up demand in the housing market is expected to be met. While rising mortgage payments and home prices will remain a challenge, improved job markets and income growth should help make housing more attainable than during the 2022โ2024 period, supporting further recovery in home sales.