President Donald Trump‘s tariffs on imports from Canada, Mexico, and China—which together account for more than a third of the products brought into the country—could “significantly impact” the U.S. housing market, a new report from Redfin found.
Why It Matters
Housing affordability has deteriorated dramatically over the last five years across the U.S. due to a historic shortage of homes, skyrocketing prices, and high mortgage rates.
During the 2024 presidential race, Trump promised to improve affordability in the housing market by deporting thousands of migrants—a move he said would increase inventory—and imposing tariffs on foreign nations—which he said would boost the economy.
However, experts fear that Trump’s policies could make construction materials more expensive and create a labor shortage in the sector, potentially bringing the cost of housing even higher.
What To Know
The president signed executive orders on Saturday imposing 25 percent tariffs on imports from Canada and Mexico, with the exception of Canadian energy products which will face a 10 percent tariff. Imports from China will also face a 10 percent tariff.
“Higher tariffs are inflationary and likely to lead to higher mortgage rates for longer, but how much higher and how much longer depends on a slew of details,” Chen Zhao, who leads the economics team at real estate brokerage Redfin, wrote in a report released on Sunday.
According to Zhao, while the Federal Reserve does not normally react to tariffs, considered to cause a one-time price increase, it might be more reluctant to continue its cutting cycle this year, especially if the economy remains strong. As a result, mortgage rates might remain high—the scenario that a majority of experts expect to unfold this year.
‘Higher Cost of Housing Materials’
Tariffs on Canada and Mexico are likely to lead to a sudden increase in construction costs, experts warn. “A substantial portion of U.S. building materials are imported from Canada,” Zhao said. “The proposed tariffs are expected to raise the cost of these materials, leading to higher expenses for home construction and renovations.”
Higher construction costs are likely to reduce housing supply, Zhao warned, and/or be passed on to homebuyers, further eroding affordability in the housing market.
Retaliation from Canada, Mexico, and China, as already announced, could reduce economic growth in the U.S., the economist said. “Estimates vary and depend on the specifics of the policy, but the U.S. economy has already been gradually weakening under the strain of high interest rates,” Zhao wrote.
“Housing demand would weaken if there is significant labor market deterioration,” she wrote. “The worst-case outcome would be a stagflation scenario with entrenched inflation and weak economic growth.”
What People Are Saying
Taylor Rogers, a spokesperson for the Trump-Vance team, previously told Newsweek in a statement: “President Trump will deliver on his promise to Make Housing Affordable Again by defeating historic inflation and reducing mortgage rates.”
She said: “President Trump will ban mortgages for illegal immigrants who drive up the price of housing, eliminate federal regulations driving up housing costs, open portions of federal land with ultra-low taxes and regulations for large-scale housing construction. The cost of new homes will be cut in half, and President Trump will end the housing affordability crisis.”
Cynthia Seifert, founder of real estate seller leads generator KeyLeads, previously told Newsweek: “Trump’s policies that aim to stimulate economic growth could cause inflation to increase, leading to higher mortgage rates—potentially offsetting some of the advantages of increased income.”
Dan Hnatkovskyy, CEO of artificial intelligence (AI)-powered marketplace Jome, formerly NewHomesMate, previously told Newsweek: “Tariffs on materials like lumber, much of which is imported from Canada, could drive up construction costs if tariffs increase.
He said: “Additionally, policies on migration and border control play a role. A portion of the construction workforce, especially in the South and Southeast, consists of undocumented immigrants. If stricter immigration policies are enforced, this could lead to a construction labor shortage, further complicating housing affordability.”
What’s Next
Trump’s tariffs on Canada, Mexico, and China could trigger trade wars with these three countries, experts warned. On Sunday, Canada’s Prime Minister Justin Trudeau said the country would retaliate with 25 percent tariffs on more than $100 billion worth of U.S. goods and would consider further measures. Mexico’s President Claudia Sheinbaum said she would decide how to retaliate on Monday, while China’s Ministry of Commerce warned of “corresponding countermeasures.”
Beijing promised to bring a case before the World Trade Organization (WTO), saying the tariffs imposed by Trump on Chinese goods “seriously violates the WTO rules.”
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