NAHB Joins Leading Economists Warning that Tariffs Threaten an Economic Downturn

Filed in Codes and Regulations, Economics by on May 3, 2018 8 Comments

This post was updated on May 4 to reflect a new record high for lumber prices.

NAHB Chief Economist Robert Dietz joined several other prominent economists at the National Press Club in Washington today to warn that a trade policy based on tariffs is harmful to growth and prosperity.

Even as President Trump moves to invoke tariffs on steel and aluminum imports, the housing industry is already reeling from sharp increases in lumber prices resulting from tariffs averaging more than 20% that were slapped on Canadian softwood lumber shipments into the United States.

The increase in the cost of lumber since the beginning of 2017 has been enough to drive up the price of an average new single-family home by more than $6,000 and the market value of an average new multifamily housing unit by roughly $2,400.

“These dramatic price increases are directly attributable to the lumber tariffs, which act as a tax on American renters and home owners, harming housing affordability as well as impeding job creation and economic growth,” Dietz said at the press conference.

Meanwhile, the latest Random Lengths Framing Lumber Composite Price Index released on May 4 shows that lumber prices set a new record this week at $525 per 1,000 board feet. This is more than 2% above the previous all-time high of $513 set in early March.

In a letter organized by the National Taxpayers Union and unveiled at the press conference, 1,100 economists, including 15 Nobel laureates and advisers to presidents Reagan, George H.W. Bush, Clinton, George W. Bush and Obama, signed an open letter to President Trump and Congress warning that a protectionist trade policy threatens to take the nation down the same path that occurred in 1930 when Congress approved the protectionist Smoot-Hawley Tariff Act that helped trigger a trade war that worsened the global economic downturn.

The letter notes that “Congress did not take economists’ advice in 1930, and Americans across the country paid the price.”

Reflecting the fear that history will repeat itself, the letter stated:

“We are convinced that increased protective duties would be a mistake. They would operate, in general, to increase the prices which domestic consumers would have to pay. A higher level of protection would raise the cost of living and injure the great majority of our citizens. Few people could hope to gain from such a change.”

The letter further added that workers in construction, transportation, utilities, banks, hotels, retail and other professions “would clearly lose” in a trade war because “they produce no products which could be protected by tariff barriers.”

Read the letter here.

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Comments (8)

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  1. Too bad the NAHB only considers Republican candidates. It’s time to realize that the only way to rid the scourge of the “republican” agenda is to elect democrats in every elected office from dog catcher to the white house.

    • NAHB Now says:

      NAHB supports both Republican and Democratic candidates.

      • Norman Hyman says:

        A serious current problem the industry faces has nothing to do with Republican and Democratic candidates-it relates directly to Trump’s tariff on Canadian lumber. But Trump isnt concerned about affordable housing; he’s only interested in big buildings.

  2. Susanna says:

    How can Congress’s warning that increased protective duties would be a mistake…. make any sense! We are already paying exorbitant prices… highest ever…. for our softwoods. Correct me if I am wrong but this started when our Trade agreement w Canada and Mexico came to an end. We are now suffering the effects of losing custom builds and un-affordable specs homes.
    Something stinks here! We need the NAHB and our political allies to get this on President Trumps desk. He can do with this what he did with steel!

  3. Russ says:

    Am I missing something ? Is the USA creating this so called trade war or are we just reacting to unfair trade practices of other nations?

  4. Serina says:

    Forgive me if I’m wrong, and in sincere humility, but maybe there is a bigger picture here… He’s increasing tariffs in order to build up the economy within the US. I don’t have a degree in economics but wouldn’t this allow more money to be poured into our own country? We might see it increase on one end, but will it not yield an increase in many other ways? Trump is a genius when it comes to business; very strategic. He’s bringing the change that was talked about in other administrations, but no real evidence of doing anything for the American people. Frankly… I’m willing to take a hit in one area to see growth and a thriving economy in this country. It’s a wise investment in my opinion.

    • Norm says:

      The tariff on Canadian soft lumber does not help the U S economy; it doesnt protect a U S product because there is no competing U S product. All the tariff does is increase the cost of low and middle income housing, thus creating a barrier to affordable housing.

  5. Robin Sproul says:

    I have no ideology, but I have noticed after 45 years of experience that every Republican administration has been bad for me and my business (the last 32 years in construction). I must assume they’ve been good for someone else’s business (finance, health care, insurance), just not mine.

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