US Housing Market Gets Tentative Good News After Trump Tariff Delay

The price of U.S. lumber has come down slightly after Donald Trump announced last week that the sweeping tariffs imposed on Canada and Mexico a couple of days before would be suspended on most goods coming from the two countries.

The modest decline is likely to draw a sigh of relief from homebuilders and housing experts concerned about the impact that heavy tariffs could have on a material that is considered of crucial importance for the construction sector.

Why It Matters

The U.S. imports about 30 percent of the softwood lumber it uses in home construction, the National Association of Home Builders (NAHB) says, because it does not produce enough domestically. This lumber comes from Canada, which produces a surplus of it.

The Trump administration wants the U.S. to expand its timber and lumber production and become less reliant on imports, framing the issue as one of national security. While efforts to increase production are yet to get underway, experts are concerned about the immediate impact that tariffs on softwood lumber imported from Canada could have on the U.S. housing market, driving up costs and potentially discouraging builders from manufacturing much-needed new homes.

What to Know

U.S. lumber futures skyrocketed over the past week after Trump announced that 25 percent tariffs on Canada and Mexico were coming into effect on March 4, but the surge stopped once the president said on Thursday that the tariffs would be delayed for a month for most goods coming from the two neighbors.

Lumber prices fell by more than 6 percent over two days after Thursday’s pause to $651 per thousand board feet, the Financial Times reported. Despite the slowdown, lumber prices are still historically high, and Canadian imports of softwood lumber remain a target of the Trump administration.

On March 1, the president signed an executive order calling for the launch of an investigation into Canadian companies potentially dumping their oversupply of lumber into the U.S. market. This investigation could add new tariffs on Canadian lumber in addition to the 14.5 percent combined duties already in place, bringing up the total duty on Canadian imports to over 50 percent.

Rising construction costs would be devastating for the U.S. housing market, which is already in the midst of an affordability crunch caused by a historic lack of supply, pent-up demand, rising home prices and stubbornly high mortgage rates. While new homes are finally landing on the U.S. market this year, a surge in lumber prices could halt or drastically reduce production, exacerbating the current inventory crisis.

What People Are Saying

Trump said in his executive order: “The United States faces significant vulnerabilities in the wood supply chain from imported timber, lumber, and derivative products being dumped on to the US market.”

Lana Payne, national president of Unifor, Canada’s largest private sector union, said in a statement:“To suggest our lumber and byproducts are a threat to American security is ludicrous but Trump is going back to his playbook to twist regulations to continue sustained attacks on the Canadian softwood industry and the jobs that depend on it.”

Unifor Quebec Director Daniel Cloutier said in the statement: “The existing unjustified duties have already hurt our industry, resulting in job loss and production slowdowns. Now Trump aims to pile tariffs on top of tariffs to further weaken our forestry sector with the goal to price our industry out of existence. The reality is the U.S. needs to import lumber, and tariffs will further drive-up prices on American consumers, particularly home-buyers.”

Carl Harris, chairman of the NAHB, said in a February 1 statement: “Tariffs on lumber and other building materials increase the cost of construction and discourage new development, and consumers end up paying for the tariffs in the form of higher home prices.”

Dan Hnatkovskyy, CEO of artificial intelligence (AI)-powered marketplace Jome, formerly NewHomesMate, previously told Newsweek: “Tariffs on materials like lumber, much of which is imported from Canada, could drive up construction costs if tariffs increase.

“Additionally, policies on migration and border control play a role. A portion of the construction workforce, especially in the South and Southeast, consists of undocumented immigrants. If stricter immigration policies are enforced, this could lead to a construction labor shortage, further complicating housing affordability.”

What’s Next

Housing experts remain deeply concerned about the impact that some of Trump’s policies could have on the U.S. market. Even if the Trump administration continues delaying tariffs on Canada’s lumber, the country could suffer from the president’s efforts to deport hundreds of thousands of migrants.

The U.S. homebuilder sector, where roughly 30 percent of the workforce is represented by immigrants, is already suffering from a shortage of labor. Mass deportation could exacerbate the situation, leading to a drop in new homebuilding projects.