Trump’s Tariffs Spark Home Price Inflation

TORONTO / CANADA

Disruptions to supply chains and construction schedules are adding to the housing shortages that are already plaguing the U.S. construction industry, as President Donald Trump threatens to impose tariffs on Canada and Mexico.

Housing experts and industry groups say the president’s new tariffs on Chinese imports will inflate home construction costs by raising the price of some electronics in many homes, according to Business Insider.

Canada, Mexico and China are among the United States’ largest trading partners and provide a significant portion of the materials the construction industry needs. Canadian lumber, Mexican plaster and Chinese electronics are among the most important building materials affected by the potential new tariffs, industry experts said.

While Trump announced Monday that he would suspend tariffs on Mexico and Canada for 30 days after reaching agreements with the countries that include strengthening border security, the tariffs on China have already taken effect.

CHINE

Beijing has responded by imposing tariffs on some U.S. goods, including coal and gas, and announcing an antitrust investigation into Google.

Experts say higher prices for imported materials will drive up housing costs and slow construction, exacerbating the housing affordability problem.

Anirban Basu, chief economist at the Associated Builders and Contractors Association, believes the mere threat of such taxes is inflating prices. If the tariffs on imports from Canada and Mexico go into effect after the pause, on top of the tariffs on Chinese imports, they will increase the cost of a new home by about $40,000 — a 10% increase.

Basu estimates that the lumber tariffs will increase the cost of building a new American home by $8,000 to $12,000.

 Mexico

Matt Saunders, senior vice president at John Burns Research and Consulting, said the United States imports about 30% of its softwood lumber from Canada, and lumber costs account for 15% to 20% of the total cost of building a typical home.

Meanwhile, tariffs on Chinese products such as plumbing fixtures, appliances, windows and doors will add about $8,000 to the cost of construction.

That’s a particular challenge because home-building materials are 40% more expensive than they were before the pandemic, Saunders said.

According to a recent survey by research firm John Burns, the vast majority — 87% — of homebuilders say the variation in material costs will have a negative impact on their operations.