CHBA's Analysis of Tariffs on Residential Construction

CHBA has been actively engaged with the Federal Government on the tariff issue since December, advising on the potential impacts of the tariffs, as well as actions that should and should not be taken in response, with over $2.5 billion worth of good and services crossing the border every day. With President Trump’s February 1 announcement of tariffs of 25% across the board on Canadian imports to the U.S. (other than energy at 10%), Canada is reacting with countervailing tariffs.

Engaging Ministers, MPs and government officials, CHBA has been advocating that construction products and materials be omitted from those Canadian tariffs to avoid increasing construction costs. The initial list of targeted goods suggests that that has mostly been achieved (with the notable exceptions of appliances and steel). CHBA has been working with other national associations to collaborate on these construction tariff issues, and has been engaged with the National Association of Home Builders (NAHB) in the U.S., who are also advocating to not have tariffs on construction goods.

In terms of the impact on residential construction, there are four principal areas that this trade war will potentially impact.

• First and foremost, a slowdown in the Canadian economy from fewer exports to the U.S. due to tariffs would reduce residential investment, starts, and supply.
• Second, Canada’s countervailing tariffs, if applied to construction goods, would increase costs of construction, further eroding affordability and access to housing for Canadians.
• Third, if the Canadian dollar weakens due to trade imbalance, imports will become more expensive, raising construction costs.
• And fourth, if the tariffs cause inflationary pressures, the Bank of Canada could consider raising interest rates, though the Bank would have to weigh that against the need for lower interest rates caused by a slowed economy. CHBA just met with the Bank of Canada this past week on these issues.

It is worth noting that the Trump tariffs across the board in the U.S. will have a much bigger impact on construction costs and housing affordability in the U.S. than the tariffs under consideration thus far in Canada. NAHB has been actively advocating with the Trump administration accordingly to remove these tariffs as well as the tariffs of the long-standing softwood lumber dispute.

In terms of actions recommended by CHBA to the government, CHBA will remain engaged with the government to ensure all considerations regarding the industry, housing supply and affordability are considered, with an emphasis on avoiding tariffs on construction products and materials. The government is stating it will provide industry and worker supports, which may indeed be needed for residential construction, depending on how things unfold. CHBA continues to advise that removal of the GST (and PST/HST) on new construction, as well as lowering of development taxes at the municipal level, could more than offset increased costs from tariffs (particularly in those municipalities with extremely high development taxes).

From a BC perspective, the provincial government announced its first of many steps to address the tariffs, which are effective immediately:

• directing the BC Liquor Distribution Branch to stop buying American liquor from “red states” and remove the top-selling “red state” brands from the shelves of public liquor stores; and
• directing the BC government and Crown corporations to buy Canadian goods and services first.

In addition, Premier Eby has established the provincial government’s new cabinet committee, chaired by Ravi Kahlon, Minister of Housing and Municipal Affairs, tasked with coordinating the whole-of-government approach to protect B.C.’s workers, businesses and economy against ongoing tariff threats from the United States.

CHBA National will conduct a member-exclusive webinar this Wednesday at 10:30 a.m. Pacific, to provide an analysis of what is known so far about the U.S. tariffs, Canada’s countervailing tariffs and other government actions, and the potential effects on Canada’s residential construction industry.

CHBA BC members can sign up here: bit.ly/40LSoFR