NAHB chief economist: Tariff tweets could be signaling pricier U.S. homes

President Donald Trump’s recent tweets escalating the U.S.-China trade war weren’t just a threat to the stock markets and the agricultural sector. Housing could be affected as well.

The president tweeted on Sunday that he might increase tariffs on $200 billion in Chinese goods at the end of this week and “shortly” impose levies on hundreds of billions of dollars of additional imports. Check the shelves of any Home Depot, and you’ll find lots of items labeled “made in China.”

“Additional tariffs on a country like China, where we get many of our construction products, are an additional tax on homes,” Robert Dietz, chief economist at the National Association of Home Builders, said in an interview. “This comes at a critical time because we currently are at a 10-year low for housing affordability.”

Tariffs, also known as duties or levies, are collected by Customs and Border Protection agents from U.S. importers as items enter the country. The nation of origin doesn’t pay the tariff, though demand for its products may drop as a result of products being more expensive. Typically, U.S. importers pass on tariffs to customers who eventually pass it on to the consumer at the end of the line – in the homebuilding industry, that’s the homebuyer. 

Tariff tweets from the president on Sunday and Monday sent stock markets tumbling around the globe and caused a rout in the grain markets. Policy analysts at Goldman Sachs issued a report saying a trade deal with China could still be reached, while others, such as Raymond James, warned the process may have been derailed.

“You have to view it in context that sometimes, with this administration, it’s seen as part of the negotiating process,” said Dietz. “The president has put these types of things out before as a type of negotiating stance.”

Last month, NAHB issued a study that showed tariffs set on Chinese goods last year was the equivalent to a $1 billion tax on the housing industry. The report noted that even the announcement of an intent to levy tariffs in the future could have a “substantial” effect on housing. 

“To improve housing affordability, we really need to bend the cost curve and that means finding ways to reduce construction costs of single-family homes, apartments and remodeling,” Dietz said. “Freer trade is good for housing because it helps to keep down cost of building material.”

Published at Mon, 06 May 2019 19:35:00 +0000