Sweeping tariffs could increase new home costs by $10k 

It's official: Steep tariffs on Canada and Mexico went into effect just after midnight today, and additional tariffs were levied on Chinese goods. And the impact on housing could be dramatic.

The 25% tariffs on the U.S.'s North American trading partners were originally slated to begin on Feb. 4 but were delayed for 30 days after Canada and Mexico agreed to increase border security. Experts say it could add thousands to the cost of a new home.

Tariffs and retaliation: On Mar. 3, the White House released a fact sheet stating that while the two countries were given "ample opportunity to curb the dangerous cartel activity and influx of lethal drugs flowing into our country, they have failed to adequately address the situation" — a claim refuted by Canadian Prime Minister Justin Trudeau, who released his own statement Monday: "Let me be unequivocally clear — there is no justification for these actions." Canada has responded with retaliatory 25% tariffs on $155 billion of U.S. goods.

Mexican President Claudia Sheinbaum said her country would also impose retaliatory tariffs, with more details expected on Sunday. "There is no motive or reason, nor justification that supports this decision that will affect our people and our nations," Sheinbaum said of Trump's move to proceed with the tariffs.

An additional 10% tariff on Chinese goods — doubling the tariffs imposed last month — also took effect today. China had already announced retaliatory tariffs following Trump's February action and said it will now broaden those tariffs to include many food items exported by U.S. farmers and sales to 15 American companies.

Effects on housing: Last month's pause on tariffs was welcomed by homebuilders concerned about the impact on construction material costs. Now that the pause has ended, the overall cost of building materials could soar by 10% in the next 12 months, while the cost of household fixtures could increase by twice that amount, according to CoreLogic data. 

The National Association of Home Builders sent a letter to the Trump administration in late January expressing "serious concerns" about the effects of tariffs on the home construction industry. Canada and Mexico are major suppliers of softwood lumber and other essential building materials. 

Uncertainty in 2025: Some signs already point to an impact on homebuilding. New home starts fell in January, and builder confidence dipped in February after climbing for five months. NAHB Chief Economist Robert Dietz said at the time that "policy uncertainty and cost factors created a reset for 2025 expectations," noting that "uncertainty on the tariff front helped push builders' expectations for future sales volume down to the lowest level since December 2023."

While single-family construction growth ended 2024 on a high note, continued progress in 2025 is less certain, Deitz said in a Mar. 4 report: "Upside and downside risks will become clearer as the new year progresses. An easing regulatory environment and tax cuts could act as tailwinds but tariffs and potentially higher deficits could dampen market momentum."

Can the U.S. just produce more of its own materials? Trump has pledged to increase U.S. timber production to offset domestic reliance on lumber imports, but that could take time, according to Paul Jannke, principal at Forest Economic Advisors. Jannke told CNBC it could take three years to ramp up production. In the meantime, tariffs could add $7,500 to $10,000 to the cost of building each new home, according to Dietz.