CHBA supports rules-based, fair and open trade as the best approach for a healthy economy and all materials and products related to the residential construction industry. Free trade is in the best interests of the residential construction industry, manufacturers, and consumers, and a major contributor to housing affordability.

The current trade dispute with the U.S. and resultant tariffs are driving up housing costs in both Canada and the U.S. CHBA recognizes that Canada’s retaliatory tariffs are aimed at protecting the Canadian economy and local industries, and notes that a very unfortunate effect of those is increased construction costs for members and in turn consumers.

CHBA therefore supports a return to rules-based, fair and open trade as quickly as possible (as do our NAHB counterparts in the U.S., with whom CHBA is collaborating, and who are calling for an end to the U.S. tariffs that have caused the situation).

Background

In response to recent decisions by the U.S. Administration to impose tariffs on Canadian steel at 25% and Canadian aluminum at 10%, the Canadian government has countered with retaliatory tariffs on U.S. products, commencing July 1, 2018. The Canadian tariffs affect more than 100 U.S. products with a value of $16.6 billion, a dollar-for-dollar response to the U.S. tariffs. Further, the Canadian tariffs have been strategically calibrated to cause the greatest regional impact and political concern in the U.S.

The overall aim of the Canadian measures is to protect Canadian producers against the U.S. tariffs. Ideally, the concerted Canadian response—together with European Union and Chinese actions along the same lines—will help to bring about a return to rational, rules-based arrangements between the two largest trading partners on the globe and more broadly among global trading blocs.

Tariffs and duties implicitly raise the cost of goods in a country—they are a mechanism to protect domestic industries and enable them to charge more for their products domestically, as imported products also become more expensive. The result in a trade war is higher prices in both countries, and they have been proven to be a losing economic strategy over the longer term. These effects are being seen in the housing industry in both Canada and the U.S. in increasing costs.

CHBA Assessment

CHBA supports a return to the long-standing free flow of housing-related goods and services in North America, for the benefit of consumers, industry and the economy. The residential construction industry on both sides of the Canada-U.S. border is united in support of free trade in all residential construction products. Both CHBA and NAHB in the U.S. are calling for an end to this “lose-lose” situation. NAHB is calling for an end to the U.S. duties, and CHBA has also been working with NAHB in coordinated advocacy on the softwood lumber dispute in attempts to accelerate resolution.

Healthy competition amongst North American material and product suppliers serves both home buyers and the industry very well, reducing costs and improving affordability.  Free trade has also proven historically to improve the efficiencies and ultimately the profitability of manufacturers who must continually innovate, increase productivity, and compete on myriad levels to be successful, benefiting them, industry and consumers.

As it stands, tariffs are negatively affecting manufacturers on both sides of the border, limiting markets and forcing prices up. This is true in both Canada and the U.S.—there is a large dependence of many U.S. states on exports to Canada and on mutually beneficial trade.

It is recognized of course that paying more for materials, especially after having signed fixed-price contracts, is not at all pleasant. Unfortunately, this is the seemingly necessary route to resolution, as the overall aim of these Canadian measures is to force a return to fair, rules-based trade, and in the meantime to protect Canadian jobs and incomes.

It is important also to note that a critical factor for a successful housing industry is a successful economy—i.e. jobs and income enable housing purchases. A healthy economy is fundamental to the economic viability of our industry.

Although no CHBA members want to see increases in materials costs (even if they  typically will form well under 2 percent of overall construction costs), under the circumstances, the health of the overall economy is the key to success for the industry—it is a return to fair trade that is most important and necessary for the residential construction sector.

What CHBA Members Can Do

While the trade war continues, CHBA members should look for alternative products and suppliers where possible, and consider contingency pricing. Also, watch for and call out suppliers who are using the opportunity to raise prices with no relationship to the new tariffs.

Manufacturers, distributors and suppliers have already started to forward letters to member companies alerting them to price increases. In turn, HBAs have been forwarding these to CHBA—these are very important to form an overall picture for briefing Canadian government officials. Please continue to forward them to CHBA National Office, which is monitoring the situation as it develops.