Homebuilders are responding to President Donald Trump’s new “Liberation Day” tariffs, and say that although the worst-case scenario was avoided, the new trade policy will inevitably raise the cost to build homes.
Trump on Wednesday announced sweeping new tariffs on most major trading partners, stunning Wall Street and sending the stock market into a nosedive.
Collectively, Trump’s trade moves bring the effective tariff rate on all imports to around 26%, up from 2.3% before he took office, according to an assessment from Capital Economics.
“While the complexity of these reciprocal tariffs makes it hard to estimate the overall impact on housing, they will undoubtedly raise some construction costs,” says Buddy Hughes, chairman of the National Association of Home Builders.
A recent survey of homebuilders found that they expect an average cost increase of $9,200 per home due to the recent tariffs. Tariffs are taxes on imported goods that must be paid by the company receiving the imports.
If their construction costs rise, homebuilders could either try to pass the increase along to buyers or reduce their profit margins. Builder margins are already under pressure, and if they are squeezed too much, construction activity could decline.
Nationally, the median sales price for new single-family homes was $414,500 in March, according to U.S. Census Bureau data.
Which states will feel the most home-price pain from tariffs
While the new tariffs will increase construction costs for homebuilders, the majority of the U.S. housing market is made up of previously owned homes.
In March, about 18% of the homes listed for sale across the country were newly built, according to Realtor.com® data.
However, new construction plays an outsized role in certain states—and those are often places where housing is scarce and the need for additional housing is the strongest.
In Idaho, a whopping 40% of active listings on the market last month were new builds, the highest share of any state.
Behind Idaho were North Carolina (33% new construction), Delaware (31%), Utah (28%), and Nebraska (28%).
“The states at the top of this list are the ones doing the most to address the housing supply gap, but they are also the most at risk of being affected by tariffs,” says Realtor.com senior economist Joel Berner.
“The cost associated with tariffs on building materials gets passed along to new-home buyers, which works against the progress builders have made in these states to grow housing inventory and make homeownership more attainable,” he adds.
Canadian lumber gets tariff reprieve in key relief for homebuilders
Importantly, Trump’s latest announcement contained a key exception that will limit the fallout for homebuilders, by continuing to exempt Canadian lumber from any new tariffs.
The NAHB estimates that 72% of imported lumber comes from Canada, making it a vital source of the key building material. Canadian lumber continues to face tariffs of 14.5%, which predate Trump’s second term. So far, he has exempted lumber from any additional new duties.
In a statement, Hughes said the homebuilder trade group “is pleased President Trump recognized the importance of critical construction inputs for housing” by continuing to exempt lumber from any new tariffs.
Still, the new tariffs could affect many imported construction inputs, ranging from appliances and fixtures made in Asia to flooring and countertops from South America.
Production that already shifted out of China in response to tariffs on that country during Trump’s first term could now be subject to harsh new levies.
For example, industry experts say kitchen sink production has moved largely from China to Malaysia and Indonesia, countries whose exports to the U.S. will now be taxed at 24% and 32%, respectively. And goods still imported from China now face eye-watering tariffs of 54%.
“Yesterday’s tariff announcement was a real whirlwind that has left the stock market reeling, but one of the few bright spots was that Canada and Mexico were largely left alone,” says Berner.
“Lumber from Canada and gypsum from Mexico are important inputs to American homebuilding, and while it would not be a surprise to see the White House target these imports again in the near future, the immediate threat of the tariff announcement on American builders appears to be less severe than it could have been,” he adds.
