President Donald Trump announced Monday that he will implement 25% tariffs on Mexican and Canadian imports, starting Tuesday.
News services reported that the announcement sparked fears of a North American trade war that already showed signs of pushing up inflation and hindering growth. Trump also signed an executive order raising tariffs on imports from China to 20%, up from 10%.
The Trump administration maintains that the tariffs are needed to force Canada and Mexico, the nation’s two largest trading partners, to do more to fight the trafficking of fentanyl and to stop illegal immigration. Trump said on Monday that the Chinese tariffs were being raised because the Chinese had not done enough to stop the flow of fentanyl and other drugs.
But Trump has also said he wants to eliminate the trade imbalances with Canada and Mexico and spur more companies to build or relocate factories in the U.S. Peter Navarro, Trump White House senior counselor on trade and manufacturing, maintained during a series of interviews Monday that the tariffs are aimed at stopping the flow of fentanyl. He also denied that tariffs are inflationary, saying that tariffs implemented during the first Trump administration did not lead to higher prices.
Wall Street did not agree, however. Trump’s announcement from the Roosevelt Room in the White House sent the stock market into a tailspin, falling nearly 900 points before recovering some of its losses in afternoon trading and finishing the day down 650 points, or 1.48%. The stock market has now erased the gains that the market experienced after Trump’s election to a second term.
Almost all economists surveyed by The Associated Press say tariffs can cause higher prices, reduce trade among countries and hurt overall economic growth. Even billionaire Warren Buffett, one of the world’s most successful investors, decided to weigh in on the debate, describing tariffs as “an act of war, to some degree,” during an interview on CBS News Sunday Morning.
The analytics firm CoreLogic has estimated that the tariffs on Canada and Mexico would increase the cost of a variety of materials used to construct homes and buildings, including lumber, steel and aluminum. If the price increases are passed on to builders and consumers, they could increase the cost of building a new home by between $17,000 and $22,000.
The National Association of Home Builders (NAHB), which has fought tariffs, estimated that the proposed new tariffs on China, Canada and Mexico could raise the cost of imported housing construction materials by $3 billion to $4 billion annually. NAHB estimates that about $184 billion worth of goods were used in the construction of both new multifamily and single-family housing in 2023. They say that about $13 billion of those goods were imported from outside the U.S., meaning approximately 7% of all goods used in new residential construction originate from a foreign nation.
The NAHB reports that about $8.5 billion worth of sawmill and wood products were imported in 2023, with nearly 70% ($5.8 billion) coming from Canada. Many of those imports are already subject to a tariff of 14.5%. The U.S. also imported $456 million worth of lime and gypsum products in 2023, with 71% of these products coming from Mexico.
“For years, NAHB has been leading the fight against tariffs because of their detrimental effect on housing affordability. In effect, the tariffs act as a tax on American builders, home buyers and consumers,” the association stated in a press release. “NAHB will continue to seek a tariff exemption for building materials. And we will actively engage with policymakers to reduce regulatory burdens and eliminate other obstacles that are preventing builders from constructing more attainable and affordable housing.”
