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ew homes being built in Englewood Cliffs, N.J. on Sept. 24th, 2024. Much of what goes into a U.S. home comes from outside American borders, including lumber, drywall, appliances, and finishings. President Donald Trump's administration has imposed tariffs on China, Mexico, and Canada, increasing the cost of these products.
Goods from China are now subject to a 20% tax, up from 10%, while those from Canada and Mexico face a 25% tax. Canadian lumber was already taxed at 14.5%. The new tariffs could increase builder costs by $7,500 to $10,000 per home, according to the National Association of Home Builders.
The greatest impact will be felt in lumber cost increases, which are expected to total around $4,900 per home on average. Roughly a third of U.S. lumber comes from Canada, and domestic producers may raise their prices to match imported supply. Lumber futures have risen 5% in the past week, with dealers hesitant to buy due to uncertainty around tariffs.
President Trump has issued an executive order to increase domestic lumber production through regulatory streamlining. The homebuilding industry sees this as a positive step, but warns that additional tariffs could further increase construction costs and discourage new development. Ramping up domestic production is challenging, as it would take up to three years to build multiple new mills.
The labor force for logging, hauling, and sawmill operation is already lean and decreasing. In the short term, pricing will be volatile, with some experts predicting a 40-year supply chain cannot be switched overnight. Beyond lumber, the homebuilding industry faces rising costs across the sector, including tariffs on household appliances and drywall imports.
Builders may pass higher costs to consumers through higher home prices or use less of these materials, resulting in smaller homes. Tariffs will change the housing market landscape, affecting not only new construction but also existing homes and remodeling projects. While mortgage interest rates have decreased, the U.S. housing market is already under pressure due to low inventory and high prices.
