by Some say that increased raw material costs will raise the cost of new construction, which could price many buyers out of the market
WASHINGTON, D.C. — In the ongoing back and forth on tariffs, the Canadian lumber industry has found itself in the crosshairs, as the Trump administration has threatened an additional 25% tariff on imports from Canada, including Canadian softwood lumber exports to the U.S.
This would fall on top of an existing 14.54% tariff, up from just over 8% in August of last year on products such as spruce, pine and fir, bringing the total to nearly 40% and perhaps higher, should the Department of Commerce double the existing 14.54% tariff as is being discussed.
While softwood lumber is used in some furniture and cabinetry made in the U.S., perhaps the largest user of this product is the U.S. housing industry.
In fact, it’s a big reason groups like the National Association of Home Builders has been so vocal on the subject.
In a March 7 statement, Buddy Hughes, chairman of the NAHB and a home builder and developer from Lexington, North Carolina, just south of High Point, praised the delay until April 2 on the 25% tariffs from both Canada and Mexico.
“NAHB commends President Trump for providing a one-month tariff delay on all products from Mexico and Canada that are covered by the United States-Mexico-Canada Agreement, including Canadian softwood lumber,” Hughes said. “Likewise, the president’s recent executive order seeking to increase domestic timber production was an important step forward to make America more self-sufficient and help builders to meet our nation’s housing needs.”
Yet he also noted that the timing of the threat of tariffs as the industry enters the spring home building season is a concern, as it could make it harder for builders and their customers to move forward with new construction products. It’s a familiar refrain to what we’ve seen in the furniture industry, as orders for some products continue to be on hold from our furniture manufacturing neighbors to the north and south.
“With the nation facing a housing affordability crisis, we continue to believe that critical construction materials should be exempt from any future tariffs,” Hughes said, a reference to two essential materials used in new home construction, softwood lumber and gypsum used in drywall, which are sourced from Canada and Mexico, respectively.
He also praised the administration for its efforts to cut regulations and boost domestic lumber output in a manner that will “further rein in housing costs so that builders can construct more homes and apartments to meet our nation’s housing needs.”
“NAHB welcomes efforts to eliminate barriers to domestic lumber production to reduce our reliance on lumber imports and meet home builders’ demand,” the group said, noting that the U.S. imports roughly 30% of the softwood lumber used in the U.S. as there “is not enough domestic capacity to meet demand.”
The group added that President Trump’s “directive to examine current policies related to permitting and timber salvage are welcome first steps toward responsibly increasing domestic production.”
Yet while the goal is to increase U.S. lumber output, that could take time and further erode housing affordability, at least in the short term. This remains an obvious concern to the furniture industry, which relies on housing sales to boost consumer interest in and demand for furniture.
None of this even addresses the tariffs on steel from China that the NAHB said could also impact the cost of buying a new home, including the cost of raw materials and appliances.
The NAHB noted that increased tariffs from Canada, Mexico and China are projected to increase the cost of imported construction materials by more than $3 billion. It added that based on anecdotal reports from its home building members, an increase in material costs would impact the cost of an average new single-family home from $7,500 to $10,000.
It estimates that even a $1,000 increase in the price of that median-priced new home will price an additional 115,593 U.S. households out of the market.
“Based on their incomes and standard underwriting criteria, these households would be able to qualify for a mortgage to purchase the home before the price increase, but not afterward,” the group said.
And in an earlier testimony relating to the challenges tariffs could have on housing affordability, the NAHB in late January said, “An ongoing challenge facing home builders is the cost and availability of building materials. Since January 2021, inputs to residential construction saw price increases of just over 30%. Our sector relies heavily on a diverse and cost-efficient supply chain for building materials such as lumber, steel, gypsum and aluminum. While home building is inherently domestic, builders rely on components produced abroad, with Canada and Mexico representing nearly 25% of building materials imports. Imposing additional tariffs on these imports will lead to higher material costs, which will ultimately be passed on to home buyers in the form of increased housing prices.”
According to the NAHB, some 100.5 million households in the U.S. already can’t afford the median-priced ($459,826) new home under the 6.5% mortgage interest rate. Yet many home builders continue to produce inventory at these and even higher prices.
As with the furniture industry, luxury products are largely recession proof as many high-end consumers are largely immune to price increases as they want what they want when they want it, no matter the costs.
But with recent stock market disruptions and associated declines in net worth, even the luxury consumer may be paying attention.
Obviously everyone else is too, and the effects on the furniture industry, let alone the overall economy, could be dramatic.
