The Trump administration’s proposed tariffs are poised to drive up housing costs in the U.S., according to an analysis by John Burns Research and Consulting. If the tariffs are implemented, the cost of a newly-constructed home is estimated to climb by nearly 5%, equivalent to around $21,000 on the median-priced new home. While the administration temporarily halted 25% tariffs on Canada and Mexico, a 10% tariff on Chinese imports has already taken effect.

The impact of these tariffs extends across various aspects of residential construction, with a significant portion of supplies coming from the targeted trading partners. For instance, approximately 60% of hardware and three-quarters of sawmill wood products originate from Canada, China, and Mexico. Notably, the U.S. imports more major household appliances from Mexico than from China by dollar amount.

The potential price hikes resulting from tariffs could have ripple effects, leading domestic suppliers to raise prices in line with their tariff-affected counterparts. Additionally, the trade tensions with Canada could disrupt the lumber supply in the long term, affecting sawmill operations.

These increased costs for building materials, coupled with existing labor shortages in the construction industry, may create challenges for homebuilders and consumers alike. The combination of factors, including immigration policies and tariffs, could further strain an already precarious environment. As demand for new homes fluctuates with mortgage rates, the industry may face constraints in production capacity, potentially impeding future supply.