Industry leaders warn new levies will drive up home costs and slow new development
As the US grapples with high mortgage rates and limited housing inventory, homebuilders say a growing trade war with China is poised to make things worse for Americans hoping to afford a new home.
President Donald Trump, who campaigned on lowering housing costs and boosting inventory, is now threatening an additional 50% levy on Chinese imports unless China walks back its retaliatory 34% tariff on US goods.
But for builders already struggling with high material prices and labor shortages, the latest round of tariffs could undercut housing affordability even further.
“While the complexity of these reciprocal tariffs makes it hard to estimate the overall impact on housing, they will undoubtedly raise some construction costs,” Buddy Hughes, chairman of the National Association of Home Builders (NAHB), said in a statement.
Higher costs
The NAHB says roughly 22% of imported building materials used in US home construction come from China. Many of those materials (including steel, aluminum, home appliances, and lighting) are already subject to multiple rounds of tariffs. New ones could ratchet prices up even more.
Since December 2020, the cost of building materials has already climbed 34%, outpacing inflation and putting additional pressure on builders' margins. According to NAHB, it takes about $174,155 worth of materials to build a new single-family home, including $12,713 from imported goods.
“Consumers end up paying for the tariffs in the form of higher home prices,” the group wrote in a recent report.
Economists say the housing market is in no shape to absorb new shocks. Rising interest rates and tight inventory have already put homeownership out of reach for many Americans. Now, industry leaders warn that tariff-fueled cost hikes could worsen the supply shortage just when more housing is most needed.
“In general, tariffs increase the cost of constructing a new home, pushing home prices up and depressing housing supply,” Redfin chief economist Chen Zhao said. “This is especially true in the context of the government’s stricter immigration policies that limit the supply of construction labor… and increase construction wages.”
On April 2, Trump announced a 10% baseline tariff on all imported goods, with China singled out for more aggressive measures. China responded with its own 34% tariff, effective April 10. Trump has threatened to raise the stakes further with a 50% levy if Beijing doesn’t back down, a move Chinese officials have called “blackmail.”
“If the US insists on going its own way, China will fight to the end,” a spokesperson for China’s commerce ministry told the Financial Times.
In 2023, the US used about $204 billion worth of building materials for new single- and multi-family housing. Roughly $14 billion, or 7%, came from imports. The organization estimated earlier that tariffs on China, Canada, and Mexico could raise construction costs by more than $3 billion, a figure that may now be even higher.
One recent survey found that new tariffs could raise the cost of building a home by $9,200. Whether those higher costs get passed on to consumers or absorbed by builders depends on whether the market will bear it.
Read more: New Trump tariffs could damage entire mortgage market
“If they can't [raise prices], they will need to absorb it in their margins, which would result in less building,” Zhao said.
Not all imports affected – for now
One silver lining for builders. Canadian softwood lumber and some Mexican goods were excluded from the latest round of tariffs. Hughes acknowledged the exemptions as a partial relief.
“NAHB is pleased President Trump recognized the importance of critical construction inputs for housing and chose to continue current exemptions for Canadian and Mexican products, with a specific exemption for lumber from any new tariffs at this time,” Hughes said.
The ripple effects may extend beyond the construction sector. Federal Reserve Chair Jerome Powell warned that tariffs “are highly likely to generate at least a temporary rise in inflation,” and noted the risk of more lasting effects if expectations shift. “Avoiding that outcome would depend on keeping longer-term inflation expectations well anchored,” he said.
Meanwhile, Danielle Hale, chief economist at Realtor.com, said China’s response suggests the standoff won’t end soon.
“What this signals for US consumers is that China may be unwilling to negotiate over the tariffs… Homebuilders and consumers will experience this in the form of higher costs for home appliances as well as lighting and other home decor that could stick around.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
