Housing Affordability: Escalation of Tariff Conflict Exacerbates Construction Costs

From Staff Reports

With lumber tariffs already adding more than $6,000 to the price of every new home in Dallas, President Trump’s decision this month to escalate the trade conflict with China has builders bracing for more challenges to housing affordability. This decision could wind up imposing a $2.5 billion tax increase on residential construction, according to the National Association of Home Builders.

Trump announced he is moving immediately to impose 10 percent tariffs on an additional $200 billion worth of Chinese imports, including $10 billion of goods used by the home building industry. This 10 percent levy represents a $1 billion tax increase on residential construction. Making matters even worse, the tax hike will rise to $2.5 billion on Jan. 1 when the president said the tariff rate will jump to 25 percent if the two nations have not resolved their differences by year end. If China retaliates, Trump has vowed to place tariffs on an additional $267 billion worth of imports. The NAHB has strongly opposed this move.

“As we have seen with lumber, the tariffs themselves are only part of the cost increase number,” said Dallas Builders Association Executive Officer Phil Crone. “The other part is the markup that some manufacturers will attribute to the tariffs or trade conflict, but may just be them not letting a good crisis go to waste. Some of our members have already received notifications to that effect.”

Responding to this action, NAHB Chairman Randy Noel issued the following statement, noting the effects this will have on the housing market and urging the White House to change course. “With America facing a housing affordability crisis, it is counterproductive to enact policies that will needlessly drive up the cost of housing. 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.”

Housing industry leaders continue to urge the Trump administration to resume trade talks with Canada. It is imperative to find a long-term solution to this trade dispute that will ensure that American home builders and consumers have access to a reliable supply of softwood lumber at reasonable prices.

“Housing affordability is the key driver of job growth to our region,” Crone said. “Loss of affordability from increasing local, federal and now international regulations is making it harder for our region to maintain the competitive advantage that we have enjoyed over other markets.”