By Lynda Work
Canadian lumber tariffs imposed in 2017 are already having an impact on the housing and paper industries and the new steel tariffs will make the crunch even worse. Home prices are set to be driven up making it difficult for young buyers and even the middle-class buyer to purchase a property.
The steel tariffs tack on 25 percent to steel, which is used in home foundations, floors and high-rise construction, and 10 percent for aluminum from foreign suppliers.
The Trump administration levied tariffs of more than 20 percent against Canadian soft lumber producers and about one-third of the lumber used in new-home construction comes from Canada.
According to Lawrence Yun, chief economist of the National Association of Realtors, tariffs could measurable raise the cost of build materials and hinder home construction of affordable homes.
While steel is used in the concrete flooring and foundations of most single-family homes, there is more used in high-rise condo and apartment buildings and other dwelling more than five floors. It is also used in elevator shafts, parking garages and stairwells.
While there are some alternatives materials, those are generally more expensive and fewer construction crews trained to use those materials, according to Jack Kern, director of research at Yardi Matrix, a commercial real estate and research firm.
“Anything that’s built that uses steel as a component is going to have a price increase,” said Kern.
Randy Noel, chairman of the National Association of Home Builders said Trump’s announcement couldn’t have come at a worse time with home builders already struggling with the 20 percent tariffs on lumber.
“The price of lumber and other key building materials are near record highs,” said Noel. “Tariffs hurt consumers and harm housing affordability.”
Modular home builders are also concerned about the tariffs pushing their costs up as well, according to Tom Hardiman, executive director of the Modular Building Institute. He said not knowing how much steel and lumber will cost makes it difficult for builders to price a new home.
While some housing can be built with wooden frames, the steel necessary for the five-story and over buildings will push construction firms to reconsider large-scale projects. Large-scale, multi-family housing is the best solution to a limited housing markets in large cities but will be the ones hit hard by steel tariffs.
From there, the repercussions will ripple outwards to investors, who will likely shy away from price volatility and affordable housing projects will likely be the first projects to be axed.
Expensive building supplies and smaller projects will force construction layoff of many workers.
According to a policy brief released by the Trade Partnership, a pro-trade think tank, Trump’s tariffs could create about 180,000 layoffs, including around 28,000 jobs in the construction industry.
The result of the tariffs means reduced construction of new homes and inflated prices for the ones that exist, and projects that are built will charge higher rents.
Though the intended purpose of the tariffs was to reopen steel mills and put some workers back on the job, what goes unseen are the millions of families who will pay higher rents, the homes and apartments that will go unbuilt, and Americans who can no longer afford to move to cities.
Tariffs are like all taxes – the consumer pays for them after being passed down the supply chain. The worst consequence of the tariffs is that Americans will pay higher prices for everything from fruit juice to televisions to batteries. Retaliatory tariffs may briefly lower domestic prices for American-made goods, but in the long run will hurt American businesses that will be unable to sell products in other countries.
The steel tariffs effect more than the housing sector and come down particularly hard for anyone who has to eat, as they are applied to stoves, ranges and ovens, microwaves. Also tariffs will hit equipment used to make chocolate, sugar, and macaroni, spaghetti or similar products, along with machinery used in the production of poultry, meat, nuts, fruit and eggs.
And just in case something might have been missed, there is another tariff on machinery for the industrial preparation or manufacture of foods and drinks, as well as bakery ovens, including biscuit ovens.
The aluminum tariff will make beer and soft drink cans more expensive, as well the steel tariff making kegs of beer more expensive, which is likely to drive the only remaining American keg-making company out of business.
The beer industry will take another hit since the cost of brewery machinery will be subject to tariffs and the presses and crushers used to manufacture wine, cider and even non-alcoholic beverages like juices.
The cost of clothing will be driven up since sewing machines, spindles, looms, weaving machines and other textile-making equipment are subject to tariffs – even sewing, embroidery and knitting needles make the list.
The tariffs also include appliances, electric generating equipment, transformers, converters, wind-powered turbines, fuses, switches, breaker and lithium, nickel and zinc batteries, audio equipment, heating and air conditioning parts, boats, golf carts, trains, planes and automobiles.
Farmers will also be affected with the rise in farm equipment and machinery, milking machines and poultry incubators and a whole host of necessary items used in the crop production of food.
Add to that, China is imposing their own tariffs on American agricultural products, particularly soy beans, hurting the export end.
For the average American, there is little knowledge of the tariff process or incredibly long lists of tariffs.
The Office of Tariff Affairs and Trade Agreements (USITC) produces a 50-plus page Harmonized Tariff Schedule of the United States Annotated (HTSA) that provides the applicable tariff rates and statistical categories for all merchandise imported into the United States. The tariff rate is provided for every item in the report. It can be accessed at USITC’s website.
In the end, the cost of tariffs will result in higher costs to the American consumer and it could be considerable as the increases eke into every aspect of daily living and industry.
While advocates of the tariffs cheer punishing other countries, the tariff retaliation will end up in every household in America.