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Canadian Counter Tariffs on Construction Materials
DID YOU KNOW?
Did you know text Note: Supporting note if needed.
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Source: Cushman and Wakefield Research, Government of Canada, Congressional Research Service
Calculating the Impact of Counter Tariffs on Construction Costs
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Material and Total Project Cost Increases
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Did domestic production and consumption increase?
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Has U.S. CRE construction demand slowed?
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Have tariffs begun to impact construction pipelines?
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What steps can developers take to underwrite effectively and mitigate cost overruns?
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Analysis
Steel and Aluminum Imports From the U.S.
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Steel has been one of the most actively managed materials, with Canada adopting a dollar-for-dollar response in March 2025 by imposing 25% counter tariffs on U.S. imports, along with an additional 25% tariff on the full value of imported derivative steel products from all countries. Aluminum is subject to the same 25% counter tariff on U.S. origin materials but has also seen multiple rounds of remission aimed at protecting supply chains for certain sectors, including manufacturing. The implications of these counter tariffs on construction costs are twofold: The “Buy Canadian” and “Buy Ontario” procurement policy adds further pressure to the supply of domestic products, with requirements set in place for the use of Canadian-produced materials on major federal and provincial infrastructure and real estate projects.
Higher input costs: Tariffs increase prices for U.S.-sourced materials such as steel and aluminum, particularly where viable domestic substitutes are limited; and Reduced competitive pressure: By restricting lower-cost imports, tariffs limit competition, reducing the incentive for Canadian producers to price aggressively.
WHAT TO WATCH
After geopolitical shifts and diversification efforts, Canada is still structurally dependent on the U.S. for steel and aluminum. Ontario imports the bulk of steel and aluminum in Canada, with around 65% of the total value of U.S. steel imports and 50% of the total value of U.S. aluminum imports. Diversification is happening, but slowly and unevenly. China’s share of steel imports has increased from approximately 20% of total imports in 2023 to around 25% in 2025, while the U.S. has declined from approximately 47% to 40% over the same period. Reorientating supply chains is both costly and a time-consuming process to complete. While the U.S. dominance persists in aluminum imports, China plays a more meaningful secondary role in aluminum compared to steel. The exposure to tariffs and supply shocks in steel and aluminum are regionally concentrated and not evenly distributed, with Ontario and the Prairies showing a higher reliance on imported U.S. steel and aluminum. Canada is simultaneously diversifying away from the U.S. while also restricting non-U.S. supply through quotas and surtaxes on imports over quotas.
Note: Steel includes HS code 73 and Aluminum includes HS code 76, data as of March, 2026 Source: Cushman and Wakefield based on Statistics Canada, Canadian International Merchandise Trade Web Application
2025 ($ Value)
Steel
Aluminum
Tariffs do not affect “construction” in the abstract, they affect specific inputs and cost weights.
Source: Cushman and Wakefield Research, Chiltern Management
The impact of Canadian counter tariffs on construction costs can be assessed by translating trade policy changes into material-level cost pressures and then evaluating how those pressures flow through a typical construction cost structure. Key considerations include: Construction costs should be viewed through a detailed cost structure that reflects the relative importance of material inputs across industrial, office, and fit-out projects. Import exposure can be estimated for each material using trade data adjusted to reflect domestic use, rather than relying only on headline import volumes. Provincial supply and consumption data help put import exposure in context by showing how imported materials compare with overall local demand. Pass-through effects vary by material and market conditions, influencing how much of a tariff-related cost increase is reflected in delivered pricing. Applying tariff rates to the relevant imported materials makes it possible to estimate the potential effect on both individual materials and overall project costs.
Note: Assuming a 75% cost pass through Source: Cushman and Wakefield based on Statistics Canada
Canada is in a period of elevated construction demand, primarily driven by: Infrastructure investment across larger nation building projects; Housing supply targets aimed at addressing long-term affordability and demographic pressures; and Commercial real estate demand. At the same time, counter tariffs introduce non-market cost increases into construction supply chains. These impacts are policy-driven, vary across regions and materials, and are layered on top of broader inflationary pressures that exist. Without explicitly quantifying these effects: Project budgets risk being understated; Cost pressures may be misattributed to market conditions; and Mitigation opportunities may be missed. Understanding where tariff-driven costs sit is critical to delivering more projects within constrained capital envelopes.
1 “raw material” only includes copper, gypsum, cement, iron & steel, aluminum Source: U.S. Geological Survey (USGS), Cushman & Wakefield Research
Analysis One objective of tariff policy is to shift production to domestic sources, but this has yet to materialize for key building materials. U.S. production of select raw materials has fallen 6% versus the 2021–2024 average1. Gypsum and cement production fell 6.3% and 5.9% versus the 2021–2024 average, reflecting weaker construction demand, idle plants, and ongoing upgrades. Refined copper output fell 10% vs. the 2021–2024 average due to refinery maintenance and lower ore grades production, though four new smelters are expected online in late 2026. Despite new investment, barriers remain. Mining, extraction and refining projects can take up to a decade to come online, with labor constraints and outdated infrastructure requiring significant upgrades. Amid trade policy uncertainty and challenging demand dynamics, the cost of achieving true self-sufficiency in domestic building materials is years away and not likely attainable for many materials.
Upgrades and refinements are underway across materials, but domestic production will take time to meet demand.
What happened to u.S. construction materials imports in 2025?
How much did construction costs increase in 2025?
Do projected cost increases affect certain property types more than others?
What are U.S. construction material tariff rates now?
Source: CoStar, Cushman & Wakefield Research, Data Center HAWK and DC Byte
Analysis Excluding data centers, most U.S. CRE construction pipelines are below the 10-year average relative to inventory. High interest rates, cautious (but improving) bank lending, and recent supply are weighing on construction activity, with tariff-driven cost increases likely to further exacerbate near-term challenges. Trade policy uncertainty is as impactful as tariffs. Ongoing policy flux is driving pricing volatility and cost uncertainty, likely slowing new development and the CRE construction pipeline until greater clarity allows for more confident underwriting. Construction loan originations are likely to pick up in 2026, which will increase demand for construction materials and potentially drive costs higher. Amid robust building activity for data center and infrastructure projects, costs are likely to accelerate further by year’s end.
Source: U.S. Bureau of Labor Statistics, Cushman & Wakefield Research
Analysis Import prices for building materials have declined 2.5% year-to date through June, However, import prices exclude the customs duties paid for tariffs and do not reflect the full cost borne by domestic users. By contrast, the producer price index (PPI) for building materials increased by 6.3% year-over-year as of July, suggesting that tariffs are raising prices for materials of both imported and domestically sourced product. At present, U.S. production capacity is unable to meet domestic demand for most key building materials. For example, with copper, the U.S. produces only about 60% of the capacity consumed each year, meaning that foreign suppliers are critical to supporting construction activity. U.S. manufacturers may invest in new plants and refineries, but these facilities often take up to a decade to come online. Labor constraints and outdated facilities are also potential barriers. Substantial modernization of existing facilities and new investment will be required if the U.S. is to become self-sufficient in terms of sourcing building materials.
Can contractors avoid cost increases by sourcing products domestically?
Do projected construction cost increases impact certain CRE property types more than others?
Which building materials are most likely to experience cost increases?
What proportion of CRE project costs are related to materials versus labor and other inputs?
Which countries are important sources of imported building materials?
How likely are suppliers and contractors to pass along cost increases to their clients?
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* % Change is expressed in square footage except data centers which are expressed in % change in MegaWatts Source: Costar, Cushman & Wakefield Research, DC Byte
Analysis As of Q2 2025, the supply pipeline for office space is down 62% from the 5-year average; the industrial pipeline is the lowest since 2017; groundbreaking on multifamily units is the softest since 2012; and retail construction has been subdued for years. High interest rates, cautious (but improving) bank lending, and the recent wave of supply are all contributing to softer construction activity. Further cost increases arising from tariffs will likely exacerbate these development challenges in the near term. Trade policy uncertainty is just as impactful as the tariffs themselves. With trade policy in constant flux, pricing volatility and uncertainty around future cost expectations may hinder new development and slow the CRE construction pipeline. Greater clarity will be needed before market participants can confidently underwrite projects with more predictable materials cost expectations.
HOW MUCH DID CONSTRUCTION COSTS INCREASE in 2025?
Construction pipelines were already thinning due to supply and demand conditions and have become even more constrained in Q2 2025.
What are the new tariff rules?
