Economics
Tariffs to add as much as $10,000 to cost of average new home, trade group says
A home is constructed at a housing development on June 21, 2023 in Lemont, Illinois.
Scott Olson | Getty Images
President Donald Trump‘s tariffs could increase material costs for the average new home by as much as $10,000, according to the National Association of Home Builders.
The trade group said it has received anecdotal reports from members that Trump’s plan for levies would raise material prices by between $7,500 and $10,000 for the average new single-family home. While the association is planning a formal survey in the future, this figure offers an early glimpse of what businesses and consumers can expect if Trump’s controversial taxes on Canadian and Mexican imports go forward as planned.
“For years, NAHB has been leading the fight against tariffs because of their detrimental effect on housing affordability,” the association wrote in a blog post published last week. “In effect, the tariffs act as a tax on American builders, home buyers and consumers.”
Trump last week delayed 25% tariffs for some Canadian and Mexican imports by a month after implementing them just days earlier, a stunning reversal amid financial market turmoil. His additional hike to levies on China, which lifted duties on that nation’s goods to 20%, went forward.
The NAHB said softwood lumber is mainly sourced from Canada, while gypsum, a component of drywall, comes primarily from Mexico. Other materials like steel and aluminum — in addition to completed home appliances — are imported to the U.S. from China, the group said.
An implementation of the 25% tariff on Canada and Mexico as previously laid out by Trump would raise total costs for imported construction materials by more than $3 billion, according to the NAHB.
Homebuilders react
Homebuilders have had to respond to analysts and investors wondering what these taxes could mean for their bottom lines. The SPDR S&P Homebuilders ETF (XHB) has tumbled more than 22% from highs seen in late November as uncertainty rattled investors.
The SPDR S&P Homebuilders ETF over the last 6 months
For D.R. Horton, around 20% of lumber is estimated to come from Canada. The Texas-based firm, like others, has made strides in recent years to shift supply chains away from China coming out of the Covid pandemic. But it still has to contend with the possibility of new taxes on components coming from Mexico, said Jessica Hansen, head of investor relations.
Tallying a total impact is difficult given the potential for Trump’s policy to change and a lack of clarity about how much of certain products are imported, Hansen said at a Barclays conference last month.
There’s “really no way to proxy what that could ultimately cost, but we’ll navigate it like we do anything,” Hansen said. “If we’ve got a cost category that’s inflating and we’re in a gross margin compressing environment, we’re going to renegotiate anything and everything that we can.”
There can also be a knock-on effect for builders that don’t rely as much on imports, like K.B. Home, whose Chief Operating Officer Robert McGibney said earlier this year sources a “majority” of products domestically. Tariffs can drive up prices for those American-made materials, he said, as competitors increase demand by localizing their supply chains.
Just last week, as international focus narrowed in on U.S. tariff policy, Taylor Morrison Home held its first-ever investor day. As part of the presentation, the homebuilder brought in Ali Wolf, chief economist at housing data provider Zonda, to explain the state of the market following years defined by high interest rates and little inventory.
Wolf said Zonda expects Trump’s tariffs to raise costs on materials for homebuilders between 6% and 14%. She also said builders in border states could also take a hit if Trump’s promise for mass deportations shrinks the workforce.
As Wolf evaluates where the market is heading in 2025, she said Trump is top of mind. The positive impact for homebuilders stemming from the administration’s posture for deregulation, she said, needs to be weighed against the concerns tied to immigration and trade policies.
“The first thing we’re paying attention to is the new administration: pro-growth, less regulation. We’re here for it. We love it,” Wolf said. “We want to see removing a lot of the red tape in particular that takes it particularly long to get new homes built.”
“With that being said, when you look at some of the policies — tariffs, immigration, interest rates — all of these disproportionately negatively impact our industry.”
Economics
Consumer sentiment tumbles in April as inflation fears spike, University of Michigan survey shows
Economics
Fed’s Kashkari says rising bond yields, falling dollar show investors are moving on from the U.S.
Minneapolis Federal Reserve President Neel Kashkari said Friday recent market trends show investors are moving away from the U.S. as the safest place to invest while President Donald Trump’s trade war escalates.
With Treasury yields rising and the U.S. dollar sagging against its global counterparts in recent days, the trends are running counter to what you might normally see, the central bank official said during a CNBC “Squawk Box” interview.
“Normally, when you see big tariff increases, I would have expected the dollar to go up. The fact that the dollar is going down at the same time, I think, lends some more credibility to the story of investor preferences shifting,” Kashkari said.
The 10-year Treasury yield has surged this week after Trump announced his intention to slap a 10% across-the-board tariff against U.S. trading partners and threatened to impose even harsher select levies before backing down Wednesday.
At the same time, the greenback has slumped more 3% against a basket of global currencies, with moves potentially signifying a turn away from safe-haven U.S. assets.
“Investors around the world have viewed America as the best place to invest, and if that’s true, we will have a trade deficit. So now one of the ways that expresses itself is in lower yields across asset classes in America,” Kashkari said. “If the trade deficit is going to go down, it could be that investors are saying, OK, America no longer is the most attractive place in the world to invest, and then you would expect to see bond yields go up.”
Kashkari noted, however, that he is seeing “stresses” but not significant dislocations in market functioning.
Kashkari does not vote this year on the rate-setting Federal Open Market Committee but will vote in 2026. He noted that his focus in the current environment is on keeping inflation expectations anchored, echoing other policymakers’ statements that rates are unlikely to move until there is clearer visibility on fiscal and trade policy.
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