HousingWireHousingWire
President Donald Trump has moved the goalposts on Mexican and Canadian tariffs, but it’s not much solace for the homebuilding industry.
The Trump administration announced Wednesday that it’s granting a one-month tariff exemption for automobiles from those two countries. The move came in consultation with “the big three autodealers.” It’s unclear if the pause comes with concessions from Canada and Mexico.
The move has been telegraphed since the 25% Canadian and Mexican tariffs took effect on Tuesday. U.S. Secretary of Commerce Howard Lutnick said on Bloomberg TV that a compromise between the nations is possible, giving a vague potential outcome that the tariffs could “meet somewhere in the middle.”
In potentially bigger news, Trump also said that so-called “reciprocal” tariffs will take effect on April 2. That would impose a duty on all imports that matches the percentages that other countries have on American goods. It has the potential to reset the price structure on a substantial portion of the economy.
Rather than tying the tariffs to changes in trade policy, the duties on those countries are intended to force commitments from Canada and Mexico to curb the flow of fentanyl into the U.S.
When President Donald Trump announced the pause on Canadian and Mexican tariffs at the beginning of February, it came in exchange for military deployments to their respective borders with the purpose of combating illegal immigration and drug trafficking.
Less than an hour before the announced auto exemption, Trump said in a social media post that Canada’s efforts on drug trafficking are “not good enough.” According to data from the U.S. Customs and Border Patrol, less than 1% of fentanyl seized in the U.S. comes from Canada, while 98% came at the Mexican border.
The auto exemption has homebuilders feeling left out. The National Association of Home Builders (NAHB) previously made a plea to the administration to exempt building materials from China, Mexico and Canada. Homebuilders heavily rely on exports from those countries, particularly for hardware, appliances and lumber.
Rather than getting an exemption, Trump has threatened to put a tariff on Canadian lumber exports, floating that it’s potentially a national security threat. He also said Tuesday that he would impose a 25% duty on steel and aluminum imports on March 12.
If the country-specific tariffs stick and he adds duties on lumber and steel, it would cause a substantial rise in the cost of building a home. A report from John Burns Real Estate Consulting (JBREC) concluded that tariffs would not only increase construction costs, but also likely raise borrowing costs.
Builders have warned that tariffs impacting construction materials would contradict a memo Trump signed at the beginning of his second term that called for emergency relief in home prices.
The on-again off-again tariffs are weighing on homebuilders. The NAHB/Wells Fargo Housing Market Index (HMI) in February fell five points compared to January, with tariffs being a primary reason.
