Former Labor Secretary Robert Reich didn't mince words when he weighed in on President Donald Trump's escalating trade war with Canada. He called it "irrational," and he's worried it's going to make the U.S. housing market even more of a mess than it already is.

Reich Warns Tariffs Could Worsen Housing

"I see the Canadian trade war as just irrational, completely and totally irrational," Reich told CNBC's "Squawk Box" on Wednesday. As Canadian wood products become more expensive, he said, "you're going to see housing becoming, again, even more of a basket case."

His warning comes as The Kobeissi Letter says U.S. housing demand has "collapsed," citing new Census Bureau and Department of Housing and Urban Development data. The weakness follows earlier signs that American homebuyers were retreating from the market.

New single-family home sales fell 10.5% in July to a seasonally adjusted annual rate of 607,000, the lowest since January and 6.3% below a year earlier. Midwest sales plunged 42.7% to 43,000, while sales in the South fell 13% to 383,000. Reuters-polled economists had expected a 620,000 pace.

High Mortgage Rates Squeeze Homebuyers Further

Borrowing costs add another hurdle. The Mortgage Bankers Association's average 30-year mortgage contract rate stood at 6.77% in mid-August, just below its late-July high of 6.81%. Elevated mortgage rates have already renewed concerns about deteriorating housing affordability.

"That is a particular problem for young people trying to get into the housing market," Reich said.

The National Association of Home Builders says the latest tariffs cover plywood and engineered wood products, raising construction-cost concerns. Canadian softwood lumber separately faces a combined 35.9% U.S. tariff rate, according to NAHB. Trump's lumber policy has previously drawn calls to ease duties on Canadian wood.

US-Canada Trade Fight Deepens Further

Trump's 50% tariffs on roughly $20 billion of Canadian goods took effect Saturday after U.S.-Canada trade talks collapsed. Canada then announced dollar-for-dollar retaliation, with tariffs of 15%, 25% and 50% on C$27.6 billion of U.S. imports starting Sept. 8.

"I think all these things are actually making consumers more desperate and everything less affordable," Reich said. "The way you deal with the trade war is you stop it."

Reich also called the tariffs "damaging for both sides" and accused Trump of "lashing out" to demonstrate dominance, saying Canada had become "an easy mark for a bully."