On March 4th, President Donald Trump imposed 25% tariffs on goods imported from Mexico and Canada, the United States’ two largest trading partners. Two days later, those tariffs were largely lifted as President Trump signed separate executive orders granting relief to goods from Mexico and Canada covered by the United-States-Mexico-Canada Agreement (an agreement signed into law by President Trump in July 2020). The relief granted by recent Presidential Orders presently lasts until April 2nd. While much uncertainty remains regarding the future of tariffs on the United States’ Northern and Southern neighbors, the short period in which the tariffs were imposed already foreshadowed potential impacts in the real estate industry.
According to the National Home Builders Association, in 2023 “roughly $183 billion worth of goods were used in the construction of both new multifamily and single-family housing” with roughly 7% of those goods originating in foreign nations. Two key materials for homebuilders, lumber and gypsum, are primarily imported from Canada and Mexico, with roughly 70% of sawmill and wood imports originating in Canada and 71% of gypsum imports originating in Mexico. With respect to lumber and wood products imported from Canada alone, the United States already imposes a 14.5% anti-dumping and anti-subsidy tariff. Coupled with the 25% tariffs, the overall tariff on Canadian lumber could increase to nearly 40%.
On March 4th and 5th while the tariffs were in effect, lumber costs reached $658.71/1000 board feet, an all-time high. By March 6th, lumber costs dropped to $631.18/1000 board feet, a decrease but a stark increase from as recently as July 2024 when lumber costs were $418.54/1000 board feet. As the National Association of Homebuilders’ Chairman, Carl Harris, notes, “Tariffs on building materials increase the cost of construction, and consumers end up paying in the form of higher home prices.” Commercial real estate builders are not immune from the impact of tariffs either, as “[s]teel and aluminum tariffs would clearly feed into higher construction costs for the commercial real estate sectors.” In a nation already facing a nearly 4.5 million housing deficit and an industry reeling from prolonged construction input prices, real estate developers across the board are bracing for the potential impact of President Trump’s proposed tariffs.
