The roller coaster status of the tariffs levied against Canada and Mexico continued up and down last week. On March 4, tariffs of 25% on Canadian and Mexican goods entering the U.S. were enacted per a previous order by President Trump, who also slapped an additional 10% tariff on Chinese products, following an initial 10% tariff last month.
Those tariffs imposed for Canada and Mexico—already delayed from February—were granted another one-month delay on March 6. The new date for implementation is now April 2 on all products from Mexico and Canada that are covered by the United States-Mexico-Canada Agreement (USMCA), a free trade treaty that Trump negotiated in his last term to replace NAFTA.
While there is no specific language in the USMCA addressing Canadian softwood lumber, officials for the National Association of Home Builders (NAHB) said they worked with the White House to ensure it was covered under the latest pause on tariff implementation.
Two essential materials used in new home construction, softwood lumber and gypsum (used for drywall), are largely sourced from Canada and Mexico, respectively, NAHB officials explained. Additionally, the association points out that numerous raw materials and components, ranging from steel and aluminum to home appliances, are sourced from China and are already subject to existing 301 and 232 tariffs, which add increased costs to construction that are ultimately passed on to consumers in the price of a home.
Canada, Mexico and China are America’s three largest trading partners. If the new tariffs on Mexico and Canada go into effect next month, they are projected to raise the cost of imported construction materials by more than $3 billion. The tariffs on China have already been imposed.
NAHB reported it has received anecdotal reports from members that they are planning for tariffs to increase material costs between $7,500 and $10,000 on the average new single-family home. The association also will survey members to better gauge real-world impacts as suppliers adjust prices in response to proposed or imposed tariffs, officials said.
Further aggravating the situation, the prospect of 25% tariffs on Canadian products, which include softwood lumber critical to the U.S. home building industry, would be on top of the existing 14.5% lumber tariffs previously imposed by the U.S. Department of Commerce (Commerce). NAHB officials said that means tariffs on Canadian lumber will surge to 39.5% on April 2. Moreover, Commerce has signaled that it plans to roughly double the 14.5% tariff rate later this year, possibly in September, meaning that the overall tariff rate on Canadian softwood lumber could rise above 50% in the fall and even approach 60%.
Two New Executive Orders on Lumber
NAHB officials outlined the timeline and impacts of the recent decisions in Washington that will affect the homebuilding sector and, ultimately, the economy. On March 1, the White House issued two executive orders on lumber. The first order centers on the need to expand American timber production and the second directive looks to examine if imports of timber and lumber threaten national security.
NAHB officials said they welcome efforts to eliminate barriers to domestic lumber production to reduce American reliance on lumber imports and meet home builders’ demand. The U.S. currently imports roughly 30% of the softwood lumber the nation uses because there is not enough domestic capacity to meet demand.
Trump’s directive to examine current policies related to permitting and timber salvage are welcome first steps toward responsibly increasing domestic production, NAHB officials said, adding that Trump’s executive order directing Commerce to investigate national security concerns related to lumber imports could also help identify obstacles that have limited sawmill production to date.
NAHB leadership said it looks forward to working with all interested stakeholders to increase the amount of harvestable timber as part of a responsible and more efficient U.S. forestry policy. However, as the U.S. seeks to reduce its reliance of imported lumber and increase domestic production, U.S. sawmill capacity also needs to rise to produce harvested lumber needed to build, remodel and repair homes and apartments.
What is NAHB Doing?
NAHB officials urged the president to reconsider his March 4 directive to impose tariffs on Canadian, Mexican and Chinese goods, given the long lead time and significant production capacity needed to create additional domestic supply. While the White House decision to institute a one-month delay on USMCA-compliant goods and services from Mexico and Canada is a positive development, even the threat of tariffs creates an uncertain business climate, officials said.
Moving forward, the NAHB leadership said the association will continue working with all relevant stakeholders to roll back tariffs on building materials, boost sawmill production and increase the domestic supply of timber from federally owned lands in an environmentally responsible manner to help fix building material supply chains and ease costs.