T
he ripple effects of President Trump's "Liberation Day" tariffs are being felt in the homebuilding industry, with builders bracing for a cost increase that could be passed on to buyers or squeeze their profit margins. The new trade policy, announced by Trump on Wednesday, has sent shockwaves through Wall Street and the stock market.

    According to Capital Economics, the effective tariff rate on all imports is now around 26%, up from 2.3% before Trump took office. This means that homebuilders will face higher costs for imported goods, including building materials, appliances, and fixtures. "While it's hard to estimate the overall impact on housing, these reciprocal tariffs will undoubtedly raise some construction costs," says Buddy Hughes, chairman of the National Association of Home Builders.

    A recent survey found that homebuilders expect an average cost increase of $9,200 per home due to the new tariffs. This could lead to a decline in construction activity if builders are forced to reduce their profit margins or pass on the increased costs to buyers. The median sales price for new single-family homes was $414,500 in March, according to U.S. Census Bureau data.

    The impact of the tariffs will be felt most acutely in states where new construction plays a significant role in addressing housing supply gaps. Idaho, North Carolina, Delaware, Utah, and Nebraska are among the top states with high shares of new listings on the market. "These states are doing the most to address the housing supply gap, but they're also the most at risk of being affected by tariffs," says Realtor.com senior economist Joel Berner.

    However, a key exception in Trump's announcement has limited the fallout for homebuilders: Canadian lumber will continue to be exempt from new tariffs. The NAHB estimates that 72% of imported lumber comes from Canada, making it a vital source of building material. "We're pleased President Trump recognized the importance of critical construction inputs for housing," says Hughes.

    Despite this reprieve, many other imported construction inputs will face harsh new levies, including appliances and fixtures made in Asia and flooring and countertops from South America. Production that shifted out of China during Trump's first term could now be subject to even higher tariffs, further increasing costs for homebuilders.