Lumber, Steel and Drywall: What the Tariff Stack Adds to a New Canadian Home

Lumber, Steel and Drywall: What the Tariff Stack Adds to a New Canadian Home

Short answer: the trade war taxes a new Canadian home twice. Washington taxes the Canadian materials that go into homes on both sides of the border: softwood lumber carries a combined 45.16 percent in US tariffs and duties as of October 18, 2026, steel and aluminum carry 50 percent Section 232 measures, and cabinets and upholstered furniture carry 25 percent. Ottawa then taxes the US-made inputs Canadian builders import: Canada's September 8, 2026 surtax order covers 648 items at 15 to 50 percent, including steel products at 50 percent and a list of building inputs from gypsum board to appliances. The Residential Construction Council of Ontario (RESCON) estimates the September counter-tariffs alone add $9,000 to $14,000 to a typical Ontario single-detached home and $18,000 to $28,000 to a mid-rise unit. Statistics Canada's construction price indexes show why: metal fabrications up 13 percent and structural steel up 8 percent between late 2024 and mid-2026 in the largest metros. Builders' selling prices, measured by the New Housing Price Index, fell 2.03 percent in the year to August 2026. Costs up, prices down is the whole story of Canadian homebuilding in 2026.

This piece is part of our trade war series. The hub maps all five channels from tariffs to housing; this piece takes the first channel, the builder's invoice, input by input. Figures are as published by the sources named, at October 18, 2026. This is education only, not construction or financial advice.

Two governments, one house

The double hit is easiest to see on a single input. Take structural steel. A Canadian mill shipping steel to the United States pays the 50 percent Section 232 tariff regime (restructured in 2026 so CUSMA-qualifying products are taxed on their non-US content, with a 15 percent minimum effective rate). A Canadian builder buying US-made steel products pays Canada's counter-tariff, which the September 8, 2026 order set at 50 percent for most covered steel and aluminum products, up from 25 percent. The same metal is taxed leaving and entering. Builders respond the way builders always respond to an input shock: they reprice new contracts, shrink what is included, delay what is not sold, and cancel what no longer pencils.

CMHC put the measured result in one table in its September 24, 2026 analysis of Statistics Canada's Building Construction Price Indexes. Across the 15 largest metros, from the fourth quarter of 2024 to the second quarter of 2026:

Construction division	Cost change, Q4 2024 to Q2 2026
Utilities	+15%
Plumbing	+14%
HVAC	+13%
Metal fabrications	+13%
Structural steel framing	+8%
Thermal and moisture protection	+6%
Openings (doors, windows)	+5%
Finishes	+4%
Electrical	+4%
Concrete	+1%
Wood, plastics and composites	0%

Residential construction costs overall rose 0.5 percent in the second quarter of 2026 after 0.7 percent in the first, and 2.3 percent year over year. The pattern in the table is the tariff map in miniature: the metal and mechanical divisions, the ones fed by cross-border supply chains, rose fastest. Wood, the most Canadian input of all, did not rise at all inside Canada. The next section explains that apparent contradiction.

Lumber: a 45 percent export tax, a flat domestic price

Softwood lumber carries the heaviest combined load of any building material. The United States charges a 10 percent Section 232 tariff on Canadian softwood lumber, in force since October 14, 2025, with no CUSMA exemption, and it stacks on top of the older anti-dumping and countervailing duties. Those duties stood at a combined 35.16 percent through mid-October 2026, for an all-in rate of 45.16 percent. On October 14 and 15, 2026, the US Commerce Department finalized its seventh administrative review, cutting the duty portion to 24.75 percent (14.11 percent countervailing, 10.64 percent anti-dumping). The cut takes effect on Federal Register publication, scheduled for October 19, bringing the combined rate to 34.75 percent. Company-specific rates vary around the all-others figure.

The damage so far is on the production side. Statistics Canada's sawmill survey showed lumber production of 3,546,400 cubic metres in July 2026, down 6.7 percent year over year, with shipments down 7.8 percent. The Forest Products Association of Canada told a Senate committee in October 2026 that five Canadian mills had closed in 2026 to that point. An industry analysis put BC softwood exports to the US down 14 percent in 2025 and 42 percent since 2016, with the US still taking roughly three quarters of BC's softwood exports. Treat that last figure as an industry source, not a statistical agency release.

Here is the part that surprises most buyers: none of this made framing lumber more expensive inside Canada. The duty is charged on exports to the US, not on wood sold to a Canadian builder, and with US demand taxed down, more Canadian wood chases the domestic market. CMHC's table above shows wood, plastics and composites at 0 percent cost growth across the tariff period. CMHC went further in the same September analysis, modelling what happens if more Canadian wood is used in Canadian homes: construction costs for ground-oriented housing (detached homes and townhouses) could be up to 17 percent lower in some centres, and annual ground-oriented starts could rise about 3.5 percent, close to 4,000 homes a year. That is a modelled possibility from CMHC, not a forecast, and it depends on builders actually substituting wood systems for costlier ones. Lumber is the one input where the trade war could, with a lag, make Canadian homes cheaper to build. It has not happened yet, because starts are falling for other reasons.

The wood products around the frame are a different story. Kitchen cabinets, vanities and upholstered wooden furniture carry a 25 percent Section 232 tariff since October 14, 2025, and under a December 2025 proclamation those rates rise on January 1, 2027, cabinets and vanities to 50 percent and upholstered furniture to 30 percent. Canada's hardwood and panel products (plywood, fibreboard, doors and window frames, wood pulp and paper) are also inside the Section 338 tariff's 50 percent net since August 22, 2026, a hit to the mills that make them rather than to your invoice directly.

Steel, aluminum and the mechanical trades

Steel is where the two governments' measures overlap most completely. The US Section 232 regime charges 50 percent on core steel and aluminum articles, 25 percent on many derivatives, with CUSMA-qualifying products assessed on their non-US content subject to a 15 percent floor on full value. Canada's September 8 order charges 50 percent on most covered US steel and aluminum products, and Canada separately runs a 25 percent surtax on listed steel-derivative products from all countries (doors and windows, wires, fasteners, bridges, wind towers) in force since December 26, 2025, plus tightened tariff-rate quotas on steel from non-FTA countries.

Builders feel this less in the frame of a wood house than in everything metal inside and around it: rebar and structural sections in concrete construction, HVAC equipment and ductwork, plumbing components, wiring, appliances, fasteners, garage doors, railings. RESCON's report listed the items its members are paying more for after September 8: structural steel and rebar, wiring, vinyl products, radiators, cabinet hardware, carpets and heat pumps. A Canadian Construction Association bulletin flagged the same territory: structural and derivative steel, aluminum, plywood, laminated veneer lumber, sawn wood, fasteners, HVAC, scaffolding, doors and windows, and lifting machinery. Rentals.ca and Urbanation, citing the same Statistics Canada price indexes over a different window, put structural steel framing up 7.2 percent since the first quarter of 2025. The windows differ from CMHC's; the direction does not.

Aluminum has a Quebec address. Statistics Canada reported that more than 94 percent of Canada's $13.4 billion of 2024 aluminum exports went to the United States and roughly 80 percent originated in Quebec, and that in the months after the US tariffs began, aluminum export volumes ran about a quarter below their 2024 monthly average. For housing, aluminum arrives as windows, soffits, cladding and wiring. The openings division in CMHC's table, doors and windows, is up 5 percent.

Drywall and the rest of the basket

Gypsum board is the cleanest example of a counter-tariff hitting a product most people never think about. When Finance Canada revised the September 8 surtax list in August 2026, gypsum board was one of the products added, alongside glass containers and copper wire, while fish and seafood came off. A Canadian builder buying US-made drywall now pays the surtax at the border, at the rate the schedule sets for that item (the order runs 15, 25 or 50 percent by product). The same order put furniture, clothing, cosmetics and plastics at 50 percent, appliances and cheese at 25 percent in Finance Canada's published examples, and certain electronics, tools and machinery parts at 15 percent.

Two mitigations exist, and both matter for how much of this reaches a buyer's price. First, substitution: for many inputs there are Canadian, Mexican or third-country sources, and the surtax applies only to goods eligible to be marked as US goods under the origin rules, so supply chains are being rewired in real time. Second, remission: Canada's surtax remission framework, extended to the 2026 orders, lets importers apply for relief where an input cannot be sourced domestically or reasonably from non-US sources. Remission is case by case and slow, which is why the cost shows up in builder pricing now and any relief arrives later.

Copper and the electrical basket

Copper sits inside the same regime with its own wrinkles. The United States has charged 50 percent on semi-finished copper (pipe, wire, rod, sheet, tube) and copper-intensive derivatives such as fittings, cables and connectors since August 1, 2025, folded into the full-customs-value framework in April 2026. Canada's main copper exports (ores, concentrates and refined metal) are excluded from the US measure, a point PwC's analysis of the proclamation makes directly, so the Canadian exposure runs through manufacturers of wire, cable and electrical components rather than mines. Finance Canada added copper wire to the September 8 surtax list, so the metal is taxed on the way into Canadian builds as well. The measured effect so far is the mildest of the metal divisions: electrical costs rose 4 percent from late 2024 to mid-2026 in CMHC's table, against 13 percent for metal fabrications. Wiring appears on RESCON's list of items its members pay more for after September 8 all the same.

The low estimate deserves its place

RESCON's five-figure numbers are the high end of a genuinely wide range, and a reader pricing a build should see the low end too. Opta Information Intelligence, which tracks reconstruction costs for insurers, modelled a theoretical 25 percent tariff on selected US-origin materials for a standard 2,000 square foot Ontario home in its Q3 2025 analysis: aluminum-clad windows $3,000, steel entry doors $600, aluminum soffit and fascia $500, galvanized ductwork $875, metal roofing $3,750, for a total uplift of $8,725, under 2 percent of rebuild cost. Opta stated plainly that the exercise was theoretical and that, as of that report, tariffs were not yet showing up in its measured cost data. The gap between Opta's under-2-percent and RESCON's $24,000 to $53,000 cumulative range per detached home is the gap between taxing a short list of US-origin line items and taxing a whole supply chain twice (once by Washington on Canadian materials, once by Ottawa on US inputs), with distributors repricing inventories in between. The Statistics Canada division data in the table above is the arbiter: low double-digit increases in the metal and mechanical divisions are measured fact, and any per-home figure is arithmetic built on top of them, sensitive to the home type and the input mix. A mid-rise concrete unit sits at the exposed end of that arithmetic; a wood-frame bungalow at the sheltered end, which is why RESCON's mid-rise estimate runs roughly double its detached one.

Starts are splitting by type, and the sheltered type is holding up

CMHC's September release has a split inside it that matters for where cost pressure lands. The seasonally adjusted annual rate of starts rose 3 percent to 248,896, but the year-to-date count of actual starts in centres of 10,000 or more is down 4 percent, and market commentary on the release noted single-detached starts slipping while multi-unit projects carried the month. Among the three largest markets, CMHC's commentary noted Montreal's annual rate down on fewer multi-unit starts, Vancouver's up, and Toronto's roughly flat, while its Deputy Chief Economist observed that of the four most populous provinces, only Quebec has gained starts in 2026. Multi-unit wood-frame is the segment where the domestic lumber shelter and the surtaxed mechanical basket fight to a draw, which is one reason it is holding volume better than the ground-oriented segment carrying the highest per-unit tariff arithmetic in the RESCON table. The 143,929 permitted-but-unstarted units CMHC counted are the option on the other side: if the dispute cools, they can start without new approvals; if it escalates, they are the first projects shelved.

How builders price a tariff in

A builder facing a 10 to 15 percent rise in the mechanical and metal divisions has four levers, and buyers meet all four in the market. New contracts are priced off current input costs, so unreleased product absorbs the increase first. Specifications change: included finishes shrink, upgrades move to the options sheet, and some builders substitute materials (the CMHC wood argument is, in part, an invitation to do exactly this). Contracts shift risk: escalation clauses and shorter price-hold windows, rare in the pre-2020 market, are how builders avoid eating a tariff announced mid-build. And projects stop: a presale project whose revenue was fixed in 2023 and whose costs reprice in 2026 can fail its financing tests, which connects this channel to the presale problem below.

The aggregate numbers show the squeeze. Statistics Canada's New Housing Price Index, the price builders actually receive for new homes, fell 2.03 percent year over year in August 2026, while the construction cost index rose 2.3 percent year over year in the second quarter. Housing starts ran at an annual rate of 248,896 in September 2026, but actual starts in the first nine months of the year were 170,964 in centres over 10,000 people, down 4 percent from 2025, and CMHC noted only Quebec among the four largest provinces has gained starts in 2026. Building permits bounced 8.8 percent in August on a multi-unit surge in Ontario, but the trailing twelve months of authorized dwellings, 299,500, is below the 305,500 of the twelve months before.

For buyers, the practical split is new-build versus resale. A resale home contains no new tariffed inputs; its price is set by rates and local demand, and the national resale index is down 3.4 percent year over year. A new home contains a builder trying to recover costs that rose 13 percent in the mechanical divisions. Expect the new-build premium over comparable resale product to widen, expect builders to compete on incentives rather than headline price (which protects their price lists and their earlier buyers), and expect the gap to be largest in concrete high-rise product, where steel, HVAC and plumbing weigh heaviest, and smallest in wood-frame ground-oriented product.

The presale trap: 2021 contracts, 2026 costs

The sharpest edge of the construction channel is not new product at all. It is the condo presale pipeline sold years ago into a different cost world. CMHC's Fall 2026 Housing Supply Report counted 156 condominium units started in the City of Toronto in the first half of 2026, against a decade average of roughly 7,000 a year, and found rental apartment starts outpacing condo starts in Toronto for the first time since 1994. Urbanation recorded zero new Toronto condo launches in the first half of 2026, a first in its data. Altus Group's August 2026 count for the GTA found 215 condo sales, 78 percent below the ten-year August average, and total remaining new-home inventory of 19,030 units, equal to 38.5 months of sales.

Tariffs are not the cause of that collapse; investor demand left first, on rates and falling rents. Tariffs are the reason the arithmetic cannot heal. A project that presold at 2021 prices and delayed construction now faces 2026 input costs for the metal and mechanical divisions, which is one reason so many approved units sit unbuilt: CMHC counted 143,929 units with approved permits not yet started in September 2026. For individual presale buyers, the exposure runs the other way: a builder who does proceed may seek price adjustments where contracts allow them, substitute finishes, or delay completion, while the buyer's unit appraises against a resale market down 3.4 percent on the year. Our appraisal gap guide and assignment sale guide cover the buyer's side of that closing table in full.

What would take the pressure off

Three dated items decide whether this channel gets worse or better. The lumber duty cut takes effect on Federal Register publication scheduled for October 19, 2026, trimming the combined lumber rate to 34.75 percent: real relief for mills, minor for your invoice, since domestic wood prices were never the problem. January 1, 2027 moves the other way, with US tariffs on cabinets rising to 50 percent and upholstered furniture to 30 percent under proclamations already issued. And the scenario work in the final piece of this series covers the largest variable: whether the Section 338 tariff and Canada's September counter-tariffs survive, shrink in a negotiation, or grow. Builders price the stack they can see. The one they can see on October 18, 2026 adds five figures to a new Ontario home, and the resale market next door is charging less than it did a year ago.