President Donald Trump's proposed tariffs on Canadian and Mexican imports could raise the cost of materials for the average new home by as much as $10,000, according to the National Association of Home Builders, CNBC reported.
The trade group speculates that these increases could significantly impact housing affordability.
The NAHB has sounded the alarm over President Donald Trump's planned tariffs on Canadian and Mexican imports, saying that key building materials such as softwood lumber from Canada and gypsum from Mexico would be directly affected.
Additionally, steel, aluminum, and finished home appliances sourced from China would also see cost hikes due to separate tariffs implemented by the administration.
"For years, NAHB has been leading the fight against tariffs because of their detrimental effect on housing affordability," the association wrote in a blog post last week. "In effect, the tariffs act as a tax on American builders, homebuyers and consumers."
Trump initially imposed a 25% tariff on select Canadian and Mexican imports but then delayed its enforcement by a month after market turbulence. Meanwhile, his administration moved forward with a separate increase on Chinese goods, raising tariffs to 20%.
The NAHB estimates that, if implemented, the 25% tariffs could raise overall costs for imported construction materials by more than $3 billion. The impact on homebuilders has already been reflected in the financial markets, with the SPDR S&P Homebuilders ETF (XHB) falling more than 22% since late November.
Texas-based homebuilder D.R. Horton, for example, sources about 20% of its lumber from Canada. In recent years, the company has sought to reduce its reliance on Chinese imports, but it remains exposed to potential cost increases from Mexican goods.
"If we've got a cost category that's inflating and we're in a gross margin compressing environment, we're going to renegotiate anything and everything that we can," Hansen said.
Even homebuilders that source most of their materials domestically, such as KB Home, may still feel the impact of tariffs. Chief Operating Officer Robert McGibney said earlier this year that tariffs can push up prices for American-made materials as competitors seek domestic alternatives, driving up demand.
The broader housing market could also face ripple effects. At its recent investor day, Taylor Morrison Home hosted Ali Wolf, chief economist at housing data provider Zonda, who projected that Trump's tariffs could increase material costs for homebuilders by 6% to 14%. Wolf also warned that mass deportations, another policy Trump has vowed to enforce, could shrink the construction workforce, further straining the industry.
"The first thing we're paying attention to is the new administration: pro-growth, less regulation. We're here for it. We love it," Wolf said. "We want to see removing a lot of the red tape in particular that takes it particularly long to get new homes built."
However, she cautioned that other policies, including tariffs and immigration measures, could negatively impact the industry. "When you look at some of the policies — tariffs, immigration, interest rates — all of these disproportionately negatively impact our industry," Wolf said.
Jim Thomas ✉
Jim Thomas is a writer based in Indiana. He holds a bachelor's degree in Political Science, a law degree from U.I.C. Law School, and has practiced law for more than 20 years.
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