Trump spares homebuilders on Canadian and Mexican imports, but China’s tariff hits hard

The bad news for homebuilders is that China got hit — hard. Trump stacked a 34% tariff on top of the 20% levy he’d already put in place. This is by far the most impactful one for homebuilders, which source a significant amount of appliances, hardware, plumbing fixtures and glass from China.

According to data from the National Association of Home Builders (NAHB), 27% of imports used in residential construction come from China. Of the countries that provide building materials to the U.S., it now has a significantly higher tariff rate than other trade partners.

Mexico and Canada provide the next largest shares of construction imports at 11% and 8%, respectively. 

As tensions with China having grown over the past decade, industries have moved manufacturing and sourcing of materials from an unlikely trade partner — Vietnam, which provides 5% of construction imports.

But despite being an increasingly valuable alternative to China, Trump claims the former war adversary has treated the U.S. “very badly.” The president hit Vietnam with a 46% tariff, leaving builders without another option to China for appliances and plumbing fixtures.

Like most industries, the threat of tariffs on Canada and Mexico have rattled homebuilders. In the past, free trade between the countries has helped to keep costs down and make housing more affordable.

Trump imposed a 25% tariff on both countries at the beginning of his second term. But he also placed a one-month pause on goods covered by the United States-Mexico-Canada Agreement (USMCA), the replacement to the North American Free Trade Agreement (NAFTA) that Trump negotiated during his first term.

This pause is critical because Canada supplies a significant amount of lumber to the U.S., while Mexico provides hardware, glass and major appliances. Despite the pause, Trump previously implemented a 25% tariff on all steel and aluminum imports that remains in effect.

While it’s unclear how long that pause will last, it’s a relief to an industry now reeling because of the Chinese tariffs.

The stock market is recognizing the impact of the tariffs. Homebuilder stocks got crushed in trading on Thursday, with LGI Homes (down 9%), Toll Brothers (-8%) and Meritage Homes (-6.8%) all falling by more than the roughly 5% drop among major stock indices.