A North American trade war is looming. For context, the cumulative value of items traded between Canada, the United States, and Mexico is more than $1.5 trillion, according to U.S. government data. The potential impacts of the U.S. trading tariffs with its neighbors to the north and south are now coming into focus, and the prognosis is bleak. While Donald Trump agreed to a 30-day pause with both countries after the White House’s initial announcement of forthcoming 25% tariffs on most imports, it seems likely that his administration will make good on the threat. (On February 9, Trump announced a new blanket tariff on all aluminum and steel imports, which will definitely impact relations with Canada and Mexico. More on that later.) Putting aside the thousands of food and consumer products that will bear the weight of new tariffs, let’s focus on those goods that are tied to the housing and construction industry, and what this policy will likely have on those markets.

Trading Canadian lumber

The U.S. gets a lot of its wood from Canada. According to World Bank figures from 2022, nearly 40% of U.S. softwood lumber imports comes from up north. (China, Brazil, Mexico, and Germany round out the top five, but with much smaller percentages.) To varying degrees, the U.S. and Canada have been trading punches for years over lumber products and what the U.S. has deemed an “unfair subsidy” in the form of Canada’s stumpage fees. Since most Canadian lumber is sourced from Crown land (aka public lands), province governments charge lumber companies a fee; the U.S. says these fees are too low—when compared to the costs of U.S. lumber companies buying land—and amount to a subsidy that, downstream, disincentivizes Americans from buying American-sourced and milled lumber.

Andrew Miller, chairman of the U.S. Lumber Coalition, has repeatedly accused Canada of “subsidizing” and “dumping” its lumber imports. “Canada overproduces softwood lumber for the sole purpose of maintaining employment in Canada, and they unload their oversupply of lumber into the U.S. market at the expense of American jobs, companies and their communities,” he said in a statement, in response to the Wall Street Journal’s January 31 editorial that scolded Trump for effectively upending the very trade agreement he negotiated and signed in his first term.

To be clear, a new 25% tariff on Canadian softwood lumber products would add to the existing 14.5% duty rate, bringing the total tax on Canadian lumber imports to 39.5%. Carl Harris, chairman of the National Association of Home Builders (NAHB), said in a statement, “Tariffs on lumber and other building materials increase the cost of construction and discourage new development, and consumers end up paying for the tariffs in the form of higher home prices.”

While this new round of tariffs would negatively impact both countries’ supply chains, it’s fair to say Canada would suffer (somewhat) more, considering that Canada is the world’s largest exporter of softwood lumber and the U.S. its biggest customer. But according to Zoltan van Heyningen, U.S. Lumber Coalition’s executive director, much of it represents lumber the U.S. neither needs nor wants. “The U.S. softwood lumber industry had the practical production capacity to supply 95% of [all domestic] consumption in 2024 … That includes demand across all phases of the construction and homebuilding industry,” he says. “The U.S. industry currently has significant excess capacity … [and] is well positioned to supply an expansion of homebuilding if market conditions allow it.”

Van Heyningen further cites that the U.S.’s increased production capacity of late (8 billion added board feet since 2016) helps offset the potential loss of Canadian lumber. But that doesn’t account for the fact that a dwindling supply chain from the north (to say nothing of Canadian-made mass timber products) would pretty much instantaneously drive up product and construction costs. And when looking at long-term effects, such tariffs could very well add more jobs domestically and provide a boost for U.S. businesses, but they would almost certainly hurt consumers and contribute to a shrinking U.S. economy.

Aluminum, steel, and gypsum

President Trump also recently announced a new 25% tariff on all U.S. imports of steel and aluminum. The U.S. and Canada are about as joined at the hip as two partners can get when it comes to aluminum. The U.S. sources roughly two-thirds of its primary or “new” aluminum from Canada, and in turn exports about $2 billion worth of finished aluminum product to Canada, according to the Aluminum Association. Canada also happens to be the largest supplier of steel to the U.S., with Mexico being a close third. Throwing the proverbial wrench into these relationships seems to make little economic sense, especially at a time when Chinese-made steel—very little of which enters the U.S.—is flooding markets and driving down prices globally.

As Lloyd Alter points out in a recent Substack post, the U.S. cutting itself off from Canada’s abundance of clean, cheap primary aluminum produced with hydropower is also a recipe for increased carbon emissions. “The American president would rather burn more coal and saddle his citizens with more expensive aluminum producing more CO2 and more perfluorocarbons,” he writes.

Recent data also reveals that in 2022 the U.S. became the world’s second largest importer and ninth largest exporter of gypsum product, used in the production of drywall, with both Canada and Mexico ranking high on those respective lists as well. The following year, the U.S. imported a record 8.1 million metric tons of gypsum, with Mexico representing the largest provider among the long list of trade partners. All things considered, if tariffs are carried out, supply chains will be disrupted, which will likely result in domestic suppliers charging more for their product. Home builders should take notice.

An adaptable and resilient economy

Some industry players are considerably less worried about the kinds of impacts such tariffs will have on the home-building sector. According to Grant Quasha, CEO of Eco-Material Technologies, a U.S.-based producer of low-carbon pozzolanic cement, tariff-inflated prices on construction materials will sting but don’t represent the harbinger many economists are making them out to be.

Demand for cementitious materials was “down six and a half percent last year; steel prices are the lowest they’ve been in years. Those are not the areas that are spiking inflation,” Quasha says. “If you want to talk about [economic] impacts, I think tariffs on construction materials are very de minimis. In my opinion, it’s immigration policy that is going to be more impactful. Labor is where the vast majority of your cost structure is going to be, especially when you’re talking about residential construction.”

Worth noting is that Quasha’s business is largely insulated from the effects of a trade war. “We benefit from entirely domestic supply chains,” he says. Eco-Material Technologies manufacturers a high-performance and ultra-low-carbon supplementary cementitious material (SCM) with no cost premium attached, and he estimates his operation keeps between six and seven million tons of CO2 from entering the atmosphere. As an environmental imperative, he sees a “strong case” for tariffs within his sector. “The only thing more environmentally damaging than producing Portland cement here in the U.S. is producing it in China and then shipping it all the way over here.

“If we’re thoughtful about our infrastructure and making it as clean and green and strong as possible,” he continues, “then [we] need to be more focused on increasing [our] resilience and decarbonizing our domestic supply chains.” Quasha’s perspective gets at the heart of what trade tariffs are intended for, which is to give domestic manufacturing a leg up and create more local competition. Indeed, economic nationalism can be a healthy thing. But is that what’s happening here?

“The dumbest trade war in history”

The logic provided by the Trump administration to justify these tariffs is an effort to close the country’s trade deficits (when a country’s imports exceed its exports), which are the largest in the world at $773.4 billion. (The U.S. has a $150 billion deficit with Mexico and a $68 billion one with Canada.) Closing those gaps is important, for sure, but this White House’s tactics thus far amount to all stick and no carrot.

The governments of Canada and Mexico have already pledged instant reciprocity if and when the 25% tariffs go into effect. Despite Trump’s (partially true) claim that “we have all the oil you need, we have all the trees you need,” a sustained trade war with our North American neighbors will strain supply chains and, with less competition in the marketplace, prompt U.S. manufacturers to raise prices.

As the Wall Street Journal’s editorial board wrote in the op-ed “The Dumbest Trade War in History,” “Mr. Trump sometimes sounds as if the U.S. shouldn’t import anything at all, that America can be a perfectly closed economy making everything at home. This is called autarky, and it isn’t the world we live in, or one that we should want to live in, as Mr. Trump may soon find out.”

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Justin R. Wolf is a Maine-based writer who covers green building trends and energy policy. He is the author of Healing Ground, Living Values: Stanley Center for Peace and Security, published by Ecotone.