Housing Market Slumps as Trade War with China Grows

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Robison Wells
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The current trade war with China—which just increased tariffs on $300 billion in Chinese goods—is having an impact on nearly every product that comes from China, leading many companies to have to adjust pricing, reevaluate new policies, and even seek new sources for their supply chains.

This is all having a harsh effect on the construction industry. The National Association of Home Builders (NAHB) called a recent 25% tariff on Chinese raw materials a “$2.5 billion tax on housing.” California’s Building Industry Association reports that the tariffs have raised the cost of each, and every new home built an estimated $20-30,000 extra, making housing in an already expensive area even more unaffordable, and causing financing problems for others.

“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 NAHB, told Housingwire. “This comes at a critical time because we currently are at a 10-year low for housing affordability.”

All of that said, many say that the tariffs are not as much to blame as other factors: the trade war is just one of many causes of increasing housing costs. For example, remodeling has increased sharply in the last decade, and natural disasters both in and outside of the country have stretched the capacity of raw materials.

But there are other sides of the tariffs that may not be noticed when calculating the price of a new home. Many remodeling materials like tile, cabinets, and flooring are already at a 10% tariff, and new furniture is facing $4.5 billion more per year.

Worse, tariffs that target products completely unrelated to construction are even having an effect, as lagging retail sales makes commercial construction less active.

There are, however, many who are supporting the tariffs and saying that they will do more good than harm. Inflation is decreasing, and is projected to decrease more. And national debt is looking to dip. Dr. Ravi Batra of Southern Methodist University says that the real economic problems are student and credit card debt.

“The housing and real estate market may be in danger from other things, such as recession,” he says. “The trade war itself is not going to do it.”

To read more about how the tariffs will impact the construction industry, read Curbed.

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