Days after President Trump enacted 10 percent trade tariffs on all Chinese goods in early February, Bentley Zhao called the company that supplies his cabinetry, tiles and stone. The store manager told him to expect to see a 10 percent price increase for any materials coming from China.
Mr. Zhao, the chief executive of New Empire, which builds high rises in New York City, was stunned to see the impact materialize so quickly.
“It’s too fast,” said Mr. Zhao, 46. “There’s no time.”
Chinese materials account for about a quarter of the $15 million materials budget for a 19-story condo, like the one he is currently building in Queens Plaza in Long Island City, Mr. Zhao estimated. A 10 percent increase would add around $375,000 to the overall budget, a manageable increase for a large project, he said. But Mr. Zhao is worried about larger tariffs to come.
On Thursday, Mr. Trump announced sweeping plans for reciprocal tariffs that could upend global trade, and the home building industry is bracing for the impact. Some builders and developers say they are beginning to feel the squeeze: They have received contracts with escalation clauses to account for increased costs; waited as their suppliers delay updated price sheets for imported goods; and received bids that are only good for two weeks when typically they would hold for two or three months.
“If they increase an extra 30 percent or 60 percent like what the president said before, that will be trouble,” said Mr. Zhao, who develops mostly moderately-priced condos throughout the city. Mr. Zhao is a frequent political donor whose donations to President Trump include a $25,000 contribution in 2017 to his Victory Fund. The New Empire website has pictures of Mr. Zhao at various fund-raisers and events standing alongside Mr. Trump, former Vice President Mike Pence, and Eric Adams, who received donations from Mr. Zhao. (There is also a photo of President Joe Biden, who gave Mr. Zhao a lifetime achievement award for community service. Mr. Zhao has headed his family business since 2004.)
Builders describe an unpredictable atmosphere where they are passing the burden of tariffs placed on them by vendors onto consumers. A house that is more expensive to build becomes more expensive to buy. Add in the risk of inflation from tariffs, and interest rates could rise in response, driving up costs even more, said Gregg Colburn, an associate professor of real estate at the University of Washington.
At Avenue Studio, the custom cabinetry and closet designer that recently raised Mr. Zhao’s prices, Tracy Wu, the store manager, has been looking for ways to control the price changes. “We try to deal with the factories to see if there is any way to lower the cost, to change the materials to lower priced materials,” she said. But any price changes will go to their customers, and that even includes Mr. Zhao, who is an investor in Avenue Studio.
“What this is doing is creating additional uncertainty throughout the supply chain that complicates an already pretty complicated process — which is getting housing built,” said Professor Colburn.
Tariffs come at a difficult moment for the housing industry. Last year, sales of existing homes sunk to their lowest level in 30 years, amid a punishing environment of high mortgage rates, expensive homes and scant inventory. A sudden spike in building costs could threaten to slow down the construction of new homes, exacerbating the national housing shortage.
“Anything we add to the cost of a house is just going to continue to lock people out of buying a new home,” said Carl Harris, a builder in Wichita, Kan., and the chairman of the National Association of Homebuilders.
Spencer Levine, the president of RAL Companies, a New York City-based developer of hotels, offices and residences, has started receiving quotes for rebar, aluminum, glass and steel and facade systems for high rises that are good for only a month or even just two weeks. Normally, such price quotes are good for two or three months. His vendors have stocked their warehouses in anticipation of a spike in prices, he said.
Mr. Levine said that the unreliability of what’s to come has made it difficult to prepare for any price changes. “It’s the lack of definition in how it’s being presented,” he said.
On Feb. 4, the day President Trump announced 10 percent tariffs on all Chinese goods, Chris Morrison, a developer, received a bid from a general contractor for a five-bedroom home he is building in a Phoenix suburb. The bid included an escalation clause to account for increases in material costs from tariffs or higher labor costs from mass deportations.
“That threw me,” he said.
Mr. Morrison’s air-conditioner supplier, which imports the systems from Mexico, has not updated its price sheet yet. Worried about what he sees as ominous signs, Mr. Morrison told his contractor to sign off on bids to lock in prices as much as possible on the $2.6 million job.
If the project’s budget balloons, Mr. Morrison says he will simply raise the price of the house when he lists it. “At the end of the day, that price becomes the norm six months later,” he said.
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