A major escalation in U.S.-Canada trade tensions
In a move that rattled markets and heightened tensions between the U.S. and Canada, President Donald Trump announced he is doubling tariffs on Canadian steel and aluminum imports, raising them from 25% to 50%.*
The decision, which Trump described as a necessary step to protect American industries, has been met with strong reactions from business leaders, economists, and officials in both countries. Critics warn that the increased costs on key materials like steel and aluminum could drive up prices for everything from cars to new homes, affecting consumers nationwide.
“This is about fairness,” Trump said during a press conference at the White House. “For too long, Canada has taken advantage of the United States on trade. We are going to bring back American jobs, and we are going to make sure our steel and aluminum industries remain strong.”
But as the cost of imported steel and aluminum spikes, industries that rely heavily on these materials—including homebuilders—are bracing for negative financial ripple effects.
*Editor's Note (March 12, 2025): Since publishing this article, it has been confirmed that Trump halted the planned increase in Canadian steel tariffs. The tariff remains at 25%. The original article below reflects earlier reporting.
Housing industry sounds the alarm: “Homebuyers will pay more”
For homebuyers, the implications of higher steel and aluminum costs could be significant.
“The homebuilding industry is already struggling with high material costs, labor shortages, and a housing affordability crisis,” said Robert Dietz, chief economist for the National Association of Home Builders (NAHB). “Raising tariffs to 50% only makes the situation worse. Homebuilders will be forced to pass these additional costs onto consumers, making new homes even less affordable.”
Steel and aluminum are widely used in framing, roofing, plumbing, appliances, HVAC systems, and structural reinforcements. With tariffs doubling, many analysts predict a sharp increase in construction costs, which could further limit the supply of new homes at a time when the market desperately needs more inventory.
Historically, similar tariffs have led to:
- Higher new home prices – In 2018, when Trump first imposed a 25% steel tariff, homebuilders saw construction costs rise by 9%, leading to price increases of $5,000 to $7,000 per home.
- Delays in home construction – Higher costs led to builders scaling back projects, reducing supply and driving up demand for existing homes.
- Increased costs for renovations and home repairs – Tariffs don’t just affect new homes; homeowners planning renovations or repairs may also face higher prices for materials like steel beams, roofing, and appliances.
If the 2018 tariffs serve as a precedent, this new 50% tariff could double those cost increases, putting even more strain on home affordability in 2025.
Will this keep mortgage rates higher?
Economists are also warning that higher tariffs could worsen inflation, making it more difficult for the Federal Reserve to cut interest rates later this year.
“The last thing the Fed wants to see is an inflationary shock coming from tariffs,” said Mark Zandi, chief economist at Moody’s Analytics. “If home construction costs rise, those increases get passed down to buyers, and that could keep inflation elevated longer than expected, delaying any rate cuts.”
Mortgage rates are currently hovering around 6.5%, far above the 3-4% levels buyers enjoyed in previous years. While many buyers had hoped for rate relief in 2025, this latest tariff move could prolong higher borrowing costs, further pricing out first-time home buyers.
Canada responds: “We will defend our industries”
Canada, which exports over $14 billion worth of steel and aluminum to the U.S. annually, has promised retaliatory measures in response to Trump’s move.
“This is an unjustified attack on Canadian workers and businesses,” said Canadian Prime Minister Justin Trudeau in a press conference. “Canada will take all necessary steps to defend our industries, including retaliatory tariffs on U.S. goods.”
While Trudeau did not specify which U.S. industries might be targeted, past trade disputes have seen Canada impose tariffs on agricultural products, whiskey, and manufactured goods in response to American tariffs.
If a full-scale trade war erupts, the economic consequences could be more widespread, with U.S. exports to Canada—America’s second-largest trading partner—also facing new barriers.
Time to make a move? Let us find the right mortgage for youWho wins and who loses?
As with any major economic policy shift, there are winners and losers in this scenario:
Winners:
- U.S. steel manufacturers – With reduced foreign competition, domestic steel and aluminum producers could see higher demand and profits.
- Politicians advocating for domestic industry protection – Trump’s nationalist agenda includes strengthening American manufacturing. His supporters could perceive this action as fulfilling that promise.
Losers:
- Homebuilders and homebuyers – Higher steel and aluminum costs mean more expensive new homes, adding to the affordability crisis.
- Renovators and contractors – Anyone needing steel roofing, HVAC systems, or structural repairs may face higher material prices.
- Automakers and construction firms – The auto and infrastructure sectors rely heavily on Canadian steel and aluminum, and their costs will now rise.
The bottom line
For buyers hoping to purchase a home in 2025, this tariff increase could spell higher costs, fewer choices, and prolonged mortgage rate uncertainty.
However, experts say the impact will depend on how builders and suppliers respond. Some builders may switch to alternative materials or adjust designs to mitigate the impact, while others might slow down new construction altogether.
Ultimately, the effects of Trump’s 50% tariff on Canadian steel and aluminum will play out over the coming months, with homebuyers, construction firms, and policymakers closely watching how this decision reshapes the housing market.
