Chinese Tariffs Act as a $1 Billion Tax Hike on Housing, Could Jump to $2.5 Billion

Filed in Economics, Trade by on September 18, 2018 29 Comments

china and US boatsPresident Trump’s decision yesterday to escalate the trade conflict with China could wind up imposing a $2.5 billion tax increase on residential construction at time when builders are already grappling with higher housing costs.

Trump announced he is moving immediately to impose 10% tariffs on an additional $200 billion worth of Chinese imports, including $10 billion of goods used by the home building industry. This 10% levy represents a $1 billion tax increase on residential construction. Making matters even worse, the tax hike will rise to $2.5 billion on Jan. 1 when the president said the tariff rate will jump to 25% if the two nations have not resolved their differences by year end.

If China retaliates, Trump has vowed to place tariffs on an additional $267 billion worth of imports — a move NAHB has strongly opposed.

Responding to this action, NAHB Chairman Randy Noel issued the following statement noting the effects this will have on the housing market and urging the White House to change course:

“President Trump’s decision to impose 10% tariffs on $200 billion worth of Chinese imports, including $10 billion of goods used by the residential construction sector, could have major ramifications for the housing industry. With housing costs on the rise, this action translates into a tax increase on housing that will rise even more significantly on Jan. 1 when the tariff rate jumps to 25 percent.

“Further, this tax increase is coming on top of the current 20% tariffs on softwood lumber imports from Canada. The lumber tariffs have already added thousands of dollars to the price of a typical single-family home.

“With America facing a housing affordability crisis, it is counterproductive to enact policies that will needlessly drive up the cost of housing. We respectfully urge the administration to change course and work to resolve these trade disputes in a manner that won’t harm American businesses and consumers.”

NAHB has been leading the charge to urge the Trump administration to resume trade talks with Canada. It is imperative to find a long-term solution to this trade dispute that will ensure American home builders and consumers have access to a reliable supply of softwood lumber at reasonable prices.

At NAHB’s urging, 171 House members sent a letter to the administration in June urging the United States to re-start softwood trade negotiations with Canada.

And in another effort spearheaded by NAHB, 12 Democratic and Republican senators sent a joint letter to Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer last week urging the administration to resume lumber trade talks and find an equitable solution that will satisfy all sides.

NAHB continues to work on all fronts to find solutions that will ensure a lasting and stable supply of lumber imports into the United States at a competitive price.

View NAHB’s analysis on how the Chinese tariffs will impact the housing sector.

For more information, contact David Logan at 800-368-5242 x8448 or Alex Strong at x8279.

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  1. Norman Hyman says:

    And add to this burden Trump is placing on housing, the cost of his tariff on Canadian soft lumber.

    • Paul Swoyer says:

      It’s short term , and the benefits out way the short term loss 10 fold . We don’t have the man power to build any faster so why not struggle a little more . This President and his team are so good for us – if we could get the the other side to help this would go away much faster . We cannot let china control our future or we are dead in the water . We would broke and fighting each other if other side would of won . Either we are with him 100% or we are not .

  2. Homebuilder Texas says:

    I see Chinese starting new American Homebuilding companies. They put 2 are 3 American employees up front and center but all the core staff are Chinese. The Chinese are aggressive. They are well capitalized.
    Wake up they want to take our markets away . If we don’t stop them they will. We have enough competition already. Supporting American owned business is the only way we survive. We have mothball so many key industries. Now, it’s time to revive them. Put Americans back to work. We have the resources to do anything we need to do “here in the USA.” Protect Americans first. Thank you.

  3. AL says:

    I don’t see this as a bad thing. We need to take control of our markets. Bending over for China to keep the cost of goods down isant how you are going to get there. It’s going to hurt for now. But I think in the long run this country will come out stronger and better than before. I hear builders complain about labor prices and materials, no one works for free and the cost of living is going up…… Stop building or do the work your self then if it’s such a problem…..

    • Mike says:

      I agree with you Al !! We’ve lost many industries to China ! It’s High time to take them back! Be nice to buy something from Home Depot that’s not made in China !!

      • AL says:

        I agree. We can’t let Mexico and China ruin a good paying industry. I’ve had Mexicans out bid me by half on brick jobs. That has to stop…. they aren’t even supposed to be working here. Tariffs and Stricter immigration are the answer.. before anyone says that’s racist….
        mind you I’m a son of immigrants. And I see what’s happening. Trump is helping us big time !!!!!

    • Of course no one works for free….but why is the builder supposed to absorb all of the burden?? We don’t want to have to work for free either. Do the work ourselves???? No one is able to build a complete house themselves. Many contractors are involved in their trim and painting….maybe other finish products. The two biggest factors are that we bid these houses based on “today’s” numbers given to us by our subs and suppliers, then months down the road when we are ready for their products or services, this 25% increase has happened and our profit is directly cut. Pass it on to the homeowner you might say. Sounds good except for two problems: 1) You are most likely already under contract for a certain price, so unless it is an allowance item, that can’t be passed on and 2) Even if you get the homeowner to agree, the home will not appraise at the higher price.

      • Al says:

        Pass costs onto the consumer. It’s not your fualt the costs are going up. If they want it and can afford it they will come up with the money….. if they want a new house that’s what it costs.

        • Corey says:

          Just bid the jobs higher. A home is the worst investment ever. With prices now…. you going to lose money anyways in the future anyways as a home owner. A few thousand dollars more wont break the cammels back. I’m paying top dollar for labor and materials. I don’t have a choice if I want to stay in business….. prospective home owners seem to understand that.

  4. Deryle Peaslee-Wood says:

    I am a real estate agent. I sell land for new construction and I also work with many builders. I understand the concerns from builders with the new tarrifs and how this will be offset to customers. But I think we do need to stand up and not let the Chinese run over us. I feel our governnent will be able to accomplish this and resolve this issue. Canada is another comcern. They are our neighbors but they should not be gouging us. There may have to be some concessions on both sides. Our building industry is strong, but it needs to continue to stay that way. Compromises take time; this is not something that’s going to be solved in a month or two. But given some time I think we will come out stronger in the long run ; none of us achieve our goals overnight. Sometimes I think Americans are such impatient people and they need to learn patience in all things. If they do, the rewards will be even greater.

  5. The only folks I hear whining are the builders addicted to Chinese cabinets . We don’t mind fare competition but we can’t compete with slave labor. Our family business has been around for abou 70 years, with the massive import of the Chinese cabinets we are doing fewer jobs and having to raise prices on what is left to cover overhead. All that keeps us going is pride so if our presidents ideas don’t work you can say good bye to another sad story.

    • Mike says:

      Larry, you obviously know little about Chinese cabinets and the factories that produce them. They are clean, automated, and now meet US EPA standards (thanks to Trump-over 100,000 small shops were closed in the last year failing to meet EPA standards). There is no slave labor either. The lowest skilled laborer in a Chinese cabinet factory, whom typically live in the factory supplied housing (ie free room and board, plus 3 free meals a day), makes about $300/month USD. Do the conversion, and that has a “purchasing power” of $2100/month….but there are no taxes, health care is virtually free, and all daily living expenses are $0. And we are talking about the lowest paid employee.

      More skilled workers, like finishers, will clear about $3000/month take home pay, and a machinist operator in charge of programming will clear about $5000/month. So in reality, the factory workers in China have a much higher standard of living than in the USA. The big costs difference is in USA taxes and regulations, plus they have access to affordable raw materials from Russia. Trump is trying to lower/eliminate taxes and regulations, to help us become more competitive, and only time will tell. However, until Americans employ the same work ethics and employment values, as say Chinese or Mexicans, we will always be behind. They don’t have, need, or want unions. They just want opportunities, and accountability for self performance and advancement. China has the fastest growing middle class in the world, and there’s a reason why.

      I agree there is a huge trade imbalance with China, and many other countries, and it needs to be fixed. But that imbalance has nothing to do with the efficiency, production costing, and acceptable profit margins from Chinese factories. Until you live in China, work in China, and/or purchase Chinese cabinets, you shouldn’t make false comments about something you know nothing about. In my experience with cabinets, if you want high quality at affordable pricing, buy in China. If you want low quality for the same price, buy made in USA factory cabinets.

  6. NC Builder says:

    I don’t believe President Trump wants tariffs. I think he wants leverage. It’s an ends to a means. He’s waiting for Canada to blink and come to us and work a new softwoods lumber deal. Same is true with China, he’s waiting for them to blink. China has had an advantage for years and he’s trying to level the playing field. I’m not saying there’s not going to be pain points along the way. In the end if we gut it out we will be in a better long term position.

  7. Bryan Davis says:

    The NAHB is dead wrong on this one. If we continue down road that we are on, our grandchildren will be economic slaves to the Chinese.

  8. don says:

    Aluminum has risen over 20%, from $1.83 a lb. to $2.25. It’s killing me in my business.

    • Joe says:

      Then don’t rely on Chinese imports. If you say that is all you can get then understand why this needs to happen. America is selling our future for short term profits. It’s Time we stand up for ourselves.

  9. Philip Lavely says:

    Why do we have to purchase so much framing material from Canada and China in the first place? We should have a good supply of timber in the USA to produce and replace a lot of the lumber we buy from Canada. Over the years environmental groups and the federal gov’t have stifled tree harvesting and lumber production in our country. Yes, Canada has many times the abundance of spruce than we do, but we have much more timber available for harvesting and lumber production here in the States than we think. As a forester I know that our lumber mills have suffered over the years because of all the many environmental and operational restrictions that the Federal Gov’t had placed on our timber industry, thus allowing Canada to take over this market. My question is, “Are we encouraging Trump to allow our own timber industry to produce the materials we need?” Another question, “Can our home builders utilize more pine in their framing? Can we to some degree switch from spruce to pine?” “Can our own lumber mills eventually compete with Canada? I put forward these questions, not really knowing the answers.

    I am assuming that the same thing is true for all the goods purchased from China. I realize that Trump’s strategy is hurting our housing industry as it is the farm industry, but I am willing to support Trump’s attempt to correct this trade imbalance at least for the short term. Hopefully, new deals will be made with all the countries that we trade with sooner than later. I heard that the Fed Gov’t is helping the farm industry by providing some relief. Last question, “Can we not request this same support for our housing market?”

  10. John says:

    We would not be in this situation if not for the inept legislators we have voted into office for years that have regulated our manufacturing industries into near non-existence. The failure is theirs and it is on both sides of the political isle.
    Countries like China and Mexico and even Canada have taken advantage of the United States with horrible trade imbalance and our elected officials let it happen.
    Our President is attempting to restore balance to our world trade and although this is not easy on any of us I am thankful we finally have someone in office that is looking out for Americas best interests. For too long our political elite have benefited personally from selling out our manufacturing industry and something had to change.

  11. John Duncan says:

    Trump is leveling the playing field for American. I’m assuming mills are being created or starting back up here in the states now that we can compete with Canadian lumber. Same with Chinese goods! As others have said above, it will be tough for the short term but huge for the long term success of this country

  12. Chris - realtor, builder, developer says:

    I sure am glad NAHB leadership is smarter than most commenting on this article. Incorrect spelling and grammar, racist comments, and un-imformed comments don’t win me over. Blind conservatives buying into Trump’s rhetoric without using their own brains. The fact is that housing has become dramatically more expensive in recent years, permit & SDC fees are on the rise, we have massive labor shortages, labor and material costs have increased, our laborers are aging, and no young people are entering the trades. The price of a new home is quickly out-pacing the values of existing homes. Stupid trade wars do nothing but make the problem worse. If you want to continue building and selling new homes, you had better find ways to do it more cost effectively. How is a 25% tariff on Chinese imports going to help? A sense a few of the respondents here are subcontractors (hence the racist comments about Mexican laborers even with massive labor shortages in all markets). For you, the market looks pretty rosy right now. If there are labor shortages, you just raise your prices, and builders have to pay them. The problem comes when we builders can’t build profitably and no longer need your services. It’s in your best interest to keep the cost of home construction down so that builders can sell homes at competitive prices and still turn a profit.

    • AL says:

      When builders can’t proffatably build any more stop building……. that’s why you should take jobs for home owners too. Even if the builders I do work for went bankrupt tomorrow, I have hoards of home owners wanting to get my company on their projects. When you develop a brand, and a good reputation. Your going to stay buissy…. with or without working for builders. Adapt to the market, achieve, and over come

  13. John says:

    Sounds like the NAHB need to pull it’s head out of itself and come up for air. Listen to your members for once!

  14. Ben Cerra says:

    None of us like the idea of having to pay more for our products, but this trade imbalance is ridiculous. We are only fooling ourselves if we think that Trump should not take drastic measures to get China and Canada to the table. I don’t know about any of you but I don’t like the idea of China dictating to us how we do business.
    The biggest thing Trump can do, in my opinion is to open up more cutting of timber on government land. This would open up smaller mills,again, to make competition for the big mills thus start bringing down lumber prices. It will also open a revenue stream for the government thus helping to keep taxes on us down. We have to start managing our forests instead of watching them go up in flames! Yes I said forest!!! I’m sick and tired of politicians making decisions to benefit themselves, their pockets and their parties. It is time to put whats best for the people. Start by admitting that we do have an overgrowth of our forests and they should be managed (not clear cutting).
    As far as the tariffs on China and Canada. I think it’s about time we had someone that will stop them from overtaking us. Foreign steel is junk! Let’s think long term and start making more of our own steel and cutting our own timber. Then watch how fast Canada and China come to the table.

    Just my thoughts on a Tuesday morning!!.

  15. Tom says:

    I am happy that the NAHB is for once taking a non-political position that simply represents what’s right for the industry. My sympathy ends there, as NAHB and its members helped elect this travesty of a President. Trump’s in-your-face position on trade ignores (or is ignorant of) our role in world markets. The US is not a victim here and I’m amazed that anyone who has benefited from being an American can find anything to whine about. As consumers, we benefit from inexpensive imported goods – in fact, WalMart etal squeeze the manufacturers to cheapen their processes to keep our costs down at the shelves. If you think we should return to the days of American manufacturing, you have to be willing to give up the cheap stuff you’ve been buying. And talk all you will, when it actually comes to putting your wallets where your ideology is, I expect to hear silence.

    This tariff is a tax and a huge one at that. But, because Trump says he needs it to lay a heavy hand on some foreign enemy of his…y’all are OK with that? As if Canada is our enemy…. And Russia isn’t? Wow. Do you ever even listen to your own thoughts?

  16. Michael Crose says:

    Hey folks. The Chinese didn’t just come over here and steal American jobs…which always seems to be the implication. Our core businesses took the jobs to China where they found cheaper labor. Why pressure the Chinese? If corporate America wants the jobs back they will come back. Problem is labor costs and investment in new infrastructure are their hang ups. It’s about the money.

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