On Wednesday, President Trump announced a broad swath of tariffs in an attempt to raise revenue and balance the playing field for international trade. A base tariff of 10% on nearly any product imported from any country was accompanied by higher reciprocal tariffs at higher rates against nations that have been enacting trade policy unfavorable to U.S. manufacturing. Trump’s “big board” laid out the damages, levying tariffs against countries like Taiwan who produce strategically important products like semiconductors, as well as ones like Cambodia who protect themselves against U.S. imports at the same time that they produce inexpensive goods imported into the U.S.
Noticeably absent from the specific targets in Trump’s speech were Canada and Mexico. In the housing space, Canada is a key supplier of lumber and Mexico is a key supplier of lime and gypsum for drywall. The ability of American homebuilders to produce affordable new inventory is directly linked to their ability to import key materials from our neighboring countries. We are encouraged to see that specific tariff hikes for home construction inputs from Canada and Mexico were not on the President’s agenda. It is estimated that almost $10,000 of the cost of a , which in the current environment of high listing prices and high mortgage rates leads to further affordability challenges for prospective buyers.
We know that affordability is the primary challenge for would-be homebuyers, so anything that raises the cost of homes will only exacerbate the problems in the housing market today. In addition, the broader economic uncertainty bubbling up from these tariff discussions has soured the stock market, and prospective homebuyers who had been counting on using some of their portfolio wealth to purchase a home have just seen their budgets shrink. Builders have been doing their best to deliver smaller, more affordable inventory to the market to fill in the missing market for first time homebuyers, but additional tariffs, especially potential blanket tariffs against Canada and Mexico, could jeopardize their ability to continue to do so. This is a dynamic environment of changing qualifications, so we would not be surprised to see lumber come under the purview of today’s tariffs. For the moment, the challenges to the U.S. housing market seem at least steady and at worst antagonized by the news.