In August, new 50% U.S. tariffs on select Canadian imports took effect after trade negotiations between the United States and Canada broke down. Canada responded with retaliatory tariffs beginning Sept. 8.
The development has drawn attention from the housing industry because some products used in home construction and renovation are among those facing higher costs. Even so, industry experts say most homebuyers are unlikely to see a meaningful impact on the price of a newly built home.
What Building Materials Are Impacted by the New Canadian Tariffs?
The new tariffs apply to roughly $20 billion worth of Canadian goods, representing about 5% of Canada's annual exports to the United States. Several of the affected products are commonly used in home construction and renovation, including lumber, steel, aluminum, copper, cabinetry, and furniture.
According to the Congressional Research Service and Global Affairs Canada, key tariffs relevant to the housing industry include:
Timber and softwood lumber: 10% tariff
Steel, aluminum, and copper: Up to 50% tariff on certain products
Upholstered furniture: 25% tariff, increasing to 30% on Jan. 1, 2027
Kitchen cabinets and vanities: 25% tariff, increasing to 50% on Jan. 1, 2027
At first glance, higher costs on building products may seem like a direct path to higher home prices. According to Ali Wolf, chief economist for NewHomeSource and Zonda, the reality is more nuanced.
Why Tariffs Aren't Expected to Significantly Raise Home Prices
"We should start by remembering that tariffs are simply another form of taxation,” Wolf said. “As trade tensions between the U.S. and Canada escalate, products subject to higher tariffs will likely see higher costs.”
But higher costs do not automatically translate into higher home prices.
Wolf noted that companies can respond to tariffs in several ways, including absorbing some of the added expense, negotiating lower prices with suppliers, sharing costs throughout the supply chain, sourcing alternative products, or passing some costs on to consumers.
Because the impact can be distributed across multiple participants in the supply chain, homebuyers rarely absorb the full cost increase. In addition, not every product used to build a home is imported, and not every imported product is subject to tariffs.
"From the consumer's perspective, we do not expect tariffs to meaningfully change the cost of purchasing a home. Any increase is likely to be negligible," she said.
Why Higher Costs Don't Always Lead to Higher Home Prices
Another reason experts expect only a modest impact is the way consumers purchase new homes.
According to Todd Tomalak, Zonda’s principal, advisory of building products, homebuyers typically make decisions about a home's finishes, fixtures, and upgrades as part of a broader design process rather than evaluating each category separately.
For example, buyers who spend more on plumbing fixtures may also invest more in cabinetry, hardware, and other design elements. Because those selections are often made together, higher costs in one category do not necessarily increase the overall price of the home. Instead, buyers can make trade-offs among upgrades while staying within their budget.
Tomalak explained, “What we start seeing is substitutions between substitute materials and other products. For example, a few thousand dollars of higher structural cost resulting in people not putting in as nice of plumbing fixtures.”
In other words: rising costs may be more likely to affect what goes into a home rather than the home's final price.