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Over the weekend, President Donald Trump delivered on one of his campaign pillars, levying a 25% additional tariff on imports from Canada and Mexico and a 10% additional tariff on imports from China.

Since the announcement, stakeholders have expressed uncertainty and concern as the situation continues to unfold. For its part, the NAHB is urging the Trump Administration to exempt building materials from the proposed tariffs “to avoid exacerbating the housing affordability crisis.” In particular, the association said more than 70% of the imports of softwood lumber and gypsum—both essential to home building—come from Canada and Mexico, respectively.

While actions surrounding the tariffs are complex and fluid—with President Trump announcing Monday a one month pause on the new tariffs for Mexican goods—Todd Tomalak, principal, advisory of building products for Zonda, shared several high-level takeaways from the tariff announcement and potential impacts.

How are the announced tariffs likely to impact the home building, building products, and related sectors?

Implications are threefold.

The industry faces three critical issues heading into the first half of 2025:

  1. A new tariff, which effectively changes upstream cost structure for a number of housing categories.
  2. Rising mortgage rates, which effectively increase the cost of payments to homeowners.
  3. A more price sensitive consumer, who since mid 2024 no longer has excess savings to offset payment shock.

With three implications:

  1. Costs for materials to grow 6 to 14% in 2025, based on value chain exposure to tariff and domestic manufacturer response.
  2. Deferred home sales and remodels, based on path of mortgage rate and buyer sensitivity to costs.
  3. Mixed impact to brands and products. In our view, an approximate eight to 18 month “brand readjustment” will occur as suppliers balance margin challenges versus shifting market share.

Is it likely that industry players will look to alternative markets to source materials internationally? Can the domestic market support potential demand for lumber and related materials?

We’ve seen this movie before. Supply chains readjust, but it takes time (usually eight to 14 months). Only some of the adjustment is actual change in source of production, while other adjustments are “on paper” (imports still from countries in question, but routed through other regions in such a way to deceive/avoid tariffs).

What most analysts don’t discuss (but should): There are near zero fully “domestic” manufacturers. Even if manufacturers make their own products, they rely on components and tools from other countries. We saw this in 2021 (when domestic manufacturers faced shortages because of upstream components). Domestic manufacturers also don’t set their prices in a vacuum. When tariffs on Chinese stainless steel occurred in 2012, domestic manufacturers subsequently raised their prices.