President Trump told reporters at the White House on Jan. 20 that he plans on sticking to his economic strategy of imposing 25 percent tariffs on all imports from Canada and Mexico, according to NBC News. The President indicated these tariffs could go into effect as soon as Feb. 1.
If a 25 percent tariff is imposed on both of the United State’s bordering neighbors, prices of imported goods will inevitably go up. This could be felt particularly keenly in the residential construction industry, which relies heavily on foreign imports for materials. Combined, nearly 20 percent of the total goods used in residential construction in the United States are imported from Canada and Mexico.
Here’s a look at how tariffs increase prices domestically and a look at the construction materials that might be impacted.
What Is a Tariff?
A tariff is a tax on an imported foreign good. Whoever receives the imported good pays the tariff. Typically, an importer has two options when faced with tariffs: either absorb the cost, reducing their profit margins, or pass the cost off to the consumer by raising prices.
Canadian Construction Imports
So, what exactly would a 25 percent tariff on Canadian goods mean for residential construction in the United States? The most immediate and obvious impact would be seen in the price of lumber.
“From Canada, the U.S. imports a significant amount of wood-related products,” reports the National Association of Home Builders. “In 2023, 70% of sawmill and wood product imports came from Canada. Many of these wood products from Canada are already subject to tariffs, with the current rate at 14.5%.”
Lumber prices have already risen 17 percent in the last year, with much of that increase coming after tariffs on Canadian lumber were raised to nearly 15 percent in August.
Steel is another major Canadian import into the United States. In fact, Canadian steel imports nearly tripled the country’s lumber imports in total value.
According to the NAHB, “Total imports of sawmill and wood products from Canada in 2023 was $5.8 billion. The highest valued import from Canada was nonferrous metals, totaling $17.6 billion in 2023.”
Mexican Construction Imports
When it comes to residential construction, Mexico’s most important imports are lime and gypsum products. According to the NAHB, over seventy percent of lime and gypsum products imported into the U.S. in 2023 originated from Mexico. Lime and gypsum are essential ingredients in mortar, plasterboard and cement.
Mexico’s exports are not limited to construction materials, either. The country exported $103 billion worth of electrical machinery and equipment and another $90 billion of computers and other machinery.
Will the Tariffs Happen?
It is difficult to say whether these tariffs will actually go into effect in February, as the new administration is still mulling over the timing and what they will look like. While there is uncertainty surrounding Trump’s tariffs, you can be sure you’ll be hearing about them more and more in the coming days.