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Trump tariffs would result in homebuilder price increases

If the promised tariffs arrive, builders can expect higher costs for everything from lumber to air conditioners

Trump-

Praising tariffs as “the greatest thing ever invented“ is unusual — that title is typically reserved for for sliced bread — but Donald Trump has always been vocal about his trade policies.

An impending return to the White House for Trump could raise U.S. homebuilding costs as his proposed tariffs would likely increase prices for essential construction materials. This echoes the impacts on housing costs from his previous term through higher tariffs on Canadian lumber.

Under President Joe Biden’s administration, tariffs on Canadian softwood lumber have persisted and even doubled. This has led to mill closures and job losses in Canada along with higher costs for U.S. builders.

Trump’s current proposals include a 10% or 20% tariff on all imports across the board, along with an additional tariff of 60% to 100% for products imported from China. On Nov. 4, the last day of campaigning, Trump also vowed to impose a 25% tariff on all Mexican goods “if they don’t stop this onslaught of criminals and drugs coming into our country.” 

Pantheon Macroeconomics forecasters estimate that a 10% universal tariff could raise inflation by roughly 0.8 percentage points next year, adding further strain on U.S. manufacturers. According to the Tax Foundation, a 20% tariff would increase taxes on U.S. households by an average of $2,045.

“We don’t have enough details to put a fine point to it yet, but based upon the broad outlines that have been described, there’s the risk it could add to the cost of housing,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association (MBA). “The most likely impact of tariffs would be to add to the cost of housing at a time that affordability is really a challenge.”

The newest framing lumber price measure from the National Association of Home Builders (NAHB) indicates steady increases, with framing lumber up 2.9% for the week ending Nov. 1 and 17.2% higher than a year ago. Sawmill curtailments and closures in North America, especially in Canada, are impacting supply as companies like Western Forest Products and Canfor reduce production due to weak demand and high U.S. tariffs. 

It’s not just raw materials as items like garage doors, air conditioning units and dumpsters may also see price hikes. Trump’s previous tariffs included up to 30% levies on steel and aluminum, raising construction costs across the board, as reported by Voice Of America

Since the details of the tariffs aren’t set in stone, Fratantoni said there are a few avenues they could create.

“If there’s just a tariff specific to one country, there’s always the potential to source those inputs from someone else for a similar cost,” he said. “If it’s the broad-base tariffs, that reduces the ability to find a lower-cost input, so that’s probably going to be more inflationary across the whole economy and adding more costs in the housing industry with more certainty.”

During Trump’s first term, tariffs on Canadian softwood lumber led to a surge in costs for homebuilders. Back in 2018, the NAHB estimated that the tariffs added nearly $9,000 to the cost of constructing a single-family home. The impact on lumber prices was dramatic, with costs rising close to 80% year over year, in part due to the taxes.

Per the Tax Foundation, the Trump administration implemented nearly $80 billion in new taxes on Americans by imposing tariffs on thousands of products value at roughly $380 billion in 2018 and 2019 — one of the largest tax hikes in decades. 

Ryan Tatro, owner of Connecticut-based RT Construction & Maintenance LLC, said that he’s optimistic about construction costs despite the looming news of tariffs.

“During the Biden administration, my revenue dropped 21%,” Tatro said. “Costs have just gone up and there was a shortage of workers. Five years ago, interest [rates] were lower; materials were a lot lower. For example, a sheet of OSB plywood four years ago was $9, and it’s gotten up to almost $50.”

Tatro said that he and his colleagues in construction have hope, but he admits he doesn’t know what could happen in the next year.

“It’s really affected builders because you give a price on a job, and back in the day, you could give a customer a 60-day window. Now, you’re literally giving people five days because prices fluctuate so much,” he said.

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