President Donald Trump's tariffs on imports from Canada, Mexico, and China—collectively accounting for over a third of U.S. imports—could have a significant impact on the U.S. housing market, according to a new report by Redfin.
Over the past five years, housing affordability has sharply declined across the U.S. due to a severe housing shortage, soaring prices, and high mortgage rates. During the 2024 presidential campaign, Trump promised to tackle affordability by deporting thousands of migrants, which he claimed would boost housing inventory, and imposing tariffs on foreign goods to strengthen the economy.
However, experts are concerned that Trump's policies could raise the cost of construction materials and exacerbate labor shortages in the sector, potentially driving housing costs even higher.
On Saturday, Trump signed executive orders imposing 25% tariffs on imports from Canada and Mexico, with the exception of Canadian energy products, which will face a 10% tariff. Imports from China will also be subject to a 10% tariff.
"Higher tariffs are inflationary and likely to lead to higher mortgage rates for a longer period," said Chen Zhao, who leads the economics team at real estate brokerage Redfin, in a report released on Sunday.
While the Federal Reserve typically does not respond directly to tariffs, which are usually seen as a one-time price increase, it may be hesitant to continue cutting interest rates, particularly if the economy remains strong. As a result, mortgage rates may stay elevated, a scenario many experts expect in the near future.
'Higher Cost of Housing Materials'
The tariffs on Canada and Mexico are expected to drive up construction costs. "A significant portion of U.S. building materials comes from Canada," Zhao explained. "The proposed tariffs will likely increase the cost of these materials, leading to higher expenses for home construction and renovations."
Higher construction costs could lead to reduced housing supply, Zhao warned, or they could be passed on to homebuyers, worsening the affordability crisis.
Retaliation from Canada, Mexico, and China, as already indicated, could slow U.S. economic growth, Zhao noted. "Estimates vary, but the U.S. economy is already showing signs of strain under high interest rates."
"Housing demand could weaken if there is a significant decline in the labor market," Zhao added. "In the worst-case scenario, the economy could experience stagflation—entrenched inflation and weak growth."
Taylor Rogers, a spokesperson for the Trump-Vance campaign, stated, "President Trump will deliver on his promise to Make Housing Affordable Again by defeating historic inflation and reducing mortgage rates." She also mentioned plans to reduce housing costs by eliminating federal regulations, opening federal land for large-scale housing projects, and banning mortgages for illegal immigrants.
Cynthia Seifert, founder of the real estate lead generator KeyLeads, warned that Trump's economic growth policies could lead to higher inflation and mortgage rates, potentially undoing any gains from higher incomes.
Dan Hnatkovskyy, CEO of AI-powered marketplace Jome, cautioned that tariffs on materials like lumber—largely imported from Canada—could raise construction costs. He also noted that stricter immigration policies could create a labor shortage in the construction industry, particularly in the South and Southeast, where many workers are undocumented.
Experts predict that Trump's tariffs could lead to trade wars with Canada, Mexico, and China. On Sunday, Canadian Prime Minister Justin Trudeau announced that Canada would retaliate with 25% tariffs on over $100 billion of U.S. goods and could consider additional measures. Mexico's President Claudia Sheinbaum said she would announce her country's response on Monday, while China's Ministry of Commerce warned of "corresponding countermeasures." China also pledged to bring the case to the World Trade Organization (WTO), arguing that the tariffs violate WTO rules.
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