How tariffs will hit the U.S. housing market

From lumber to drywall to appliances to finishings, much of what goes into a U.S. home comes from outside American borders.

The cost of those products is about to go up, as President Donald Trump‘s administration imposes tariffs on China, Mexico and Canada. Goods from China are now subject to a 20% tax, an increase from a previous 10% tax, and those from Canada and Mexico face a 25% tax. Canadian lumber was already subject to separate duties of 14.5%.

The new tariffs could increase builder costs anywhere from $7,500 to $10,000 per home, said Rob Dietz, chief economist at the National Association of Home Builders, citing estimates from U.S. homebuilders. Last year the NAHB estimated that every $1,000 increase in the median price of a new home prices out roughly 106,000 potential buyers.

The greatest impact to homebuilders will be from lumber cost increases, which are expected to total about $4,900 per home on average, according to Leading Builders of America, the trade group representing most of the nation’s publicly traded homebuilders.

Roughly a third of the lumber used in U.S. homebuilding comes from Canada, and domestic lumber producers are expected to raise their prices to match the imported supply.

“Since Trump first imposed the tariffs on Feb. 1, which were then delayed, we’ve seen some increase in buying with prices for Western Spruce-Pine-Fir two-by-fours increasing 13%,” said Paul Jannke, principal at Forest Economic Advisors. “With the re-imposition of the 25% tariff on Canadian goods shipped to the U.S., we expect Canadian producers will stop shipping lumber to the U.S. Meanwhile, dealers, who have been hesitant to buy given uncertainty around the tariffs, will need to step up purchases ahead of the coming building season. This will drive prices higher.”

Lumber futures are up 5% in the past week and were rising steadily Tuesday.  

Trump on Saturday issued an executive order to increase domestic lumber production through a streamlining of regulatory and permitting processes. The homebuilding industry took that as a win.

“A stable and affordable supply of lumber is critically important for our industry to address the country’s housing supply crisis,” wrote Ken Gear, CEO of the LBA, in a statement. “The domestic lumber industry cannot meet current demand, so we applaud President Trump for exploring opportunities to increase domestic supply as a long term solution.”

The NAHB, which represents small to mid-sized private builders, “welcomed” the move, but said in a statement, “Any additional tariffs on lumber could further increase the cost of construction and discourage new development, and consumers end up paying for the tariffs in the form of higher home prices.”

As for ramping up domestic production immediately, that’s easier said than done. Jannke estimates it would take up to three years to build multiple new mills. He explained that there are a…