As the Trump administration continues to discuss levying new tariffs as part of its ongoing dispute with China, the escalating trade war is already touching many of the raw materials the housing industry depends on; the current 25 percent tariff on imported building material that went in effect in May has been called a “$2.5 billion tax on housing” by the National Association of Home Builders.

In California, arguably the state with the most severe housing shortage in the country, the California Building Industry Association estimates tariffs have added $20,000 to $30,000 to the cost of an average-size new home, putting some new homes out of reach of potential buyers and complicating financing for existing projects.

Trump has said he wants to raise this tariff an additional 5 percent, but the increase didn’t appear in the latest notice from the Unites States Trade Representative, which precedes any policy shift.

“Additional tariffs on a country like China, where we get many of our construction products, are an additional tax on homes,” Robert Dietz, chief economist at NAHB, told Housingwire. “This comes at a critical time because we currently are at a 10-year low for housing affordability.”

While increasing tariffs can have a substantial impact on the economy, it’s important not to overstate their influence. The trade war is taking place just as numerous other factors are putting pressure on the housing market, according to Holly Tachovsky, CEO of BuildFax, a company that collects, compiles, and sells data about the history and condition of commercial and residential property. 

Remodeling spending has spiked since the Great Recession, a string of hurricanes and natural disasters has absorbed construction industry resources, and material prices are already high, compared to historic levels, having risen 20 percent since 2008.

“Tariffs are one factor in a handful that are leading to the pressure we’re in,” says Tachovsky.

 

This content is not the product of the National Association of REALTORS®, and may not reflect NAR's viewpoint or position on these topics and NAR does not verify the accuracy of the content.