New tariffs against China could add $1 billion in costs to goods involved with housing construction.
According to CNBC’s Realty Check, the National Association of Home Builders estimates that of the 6,000 goods under the umbrella of the latest round of tariffs, roughly 600 products, representing $10 billion in goods, are related to the construction of new apartments and homes.
This means this salvo in the trade war is about to hit the housing industry right where it hurts: the affordability crisis.
With the 10% tariff set to take hold on these goods September 24, the housing industry is slated to absorb $1 billion in additional costs associated with building new housing stock.
The market is already too expensive right now, both for renters and buyers and the increases in prices for both are such that living expenses are outstripping wage growth by a solid margin.
“Free trade is better for builders buyers and renters,” NAHB Chief Economist Robert Dietz told CNBC.
“Housing affordability is becoming a challenge, as builders face overly burdensome regulations and rising material costs exacerbated by an escalating trade skirmish. Interest rates are also forecasted to keep rising,” he added.
Randy Noel, the chairman of the NAHB, said that the group would like to see the tariffs reversed.
“President Trump’s decision to impose 10% tariffs on $200 billion worth of Chinese imports, including $10 billion of goods used by the residential construction sector, could have major ramifications for the housing industry,” Noel said in a statement.
“With housing costs on the rise, this action translates into a tax increase on housing that will rise even more significantly on Jan. 1 when the tariff rate jumps to 25%. Further, this tax increase is coming on top of the current 20% tariffs on softwood lumber imports from Canada. The lumber tariffs have already added thousands of dollars to the price of a typical single-family home,” Noel continued.
“With America facing a housing affordability crisis, it is counterproductive to enact policies that will needlessly drive up the cost of housing,” Noel added. “We respectfully urge the administration to change course and work to resolve these trade disputes in a manner that won’t harm American businesses and consumers.”