Will Tariffs Increase Housing Costs?

The Real Estate Espresso Podcast

Will Tariffs Increase Housing Costs?

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Will Tariffs Increase Housing Costs?

Welcome to the Real Estate Espresso Podcast, your morning shot of what’s new in the world of real estate investing. I’m your host, Victor Menasce. On today’s show, we’re discussing the potential for a global trade war and what it could mean for real estate investors in the US and Canada.

President Trump has, even prior to taking office, rattled markets globally with the threat of tariffs. To truly understand the threat, we need to delve beneath the surface. We can review the tariffs used during the first Trump administration and examine the president’s recent statements to better grasp where we might be headed.

In the aftermath of the U.S. federal election, President Trump tweeted that he planned to impose a 25% tariff on all goods imported from Mexico and Canada. This news was met with reactions of concern and dread across the markets. However, it’s important to note that this statement is only a part of the larger context.

President Trump’s recent tariff threat against Canada and Mexico is centered around border security and drug trafficking. He proposed a 25% tariff on all goods from these nations, effective January 20, 2025, unless they undertake measures to curb drug flow, especially fentanyl, and undocumented migrants into the U.S.

This proposal has sparked significant worry and tension. Should these tariffs be put into effect, both Canadian and Mexican economies could face severe impacts. The Canadian government is taking steps in negotiation with the incoming administration to avoid these tariffs.

The core understanding here is that imposing tariffs could harm the U.S. as much as it might benefit them. I believe the threat of tariffs serves to create negotiating leverage. As the inherent cost of securing the U.S. border rises, President Trump could potentially use these tariffs as a way to have Mexico and Canada shoulder a portion of that cost.

During Trump’s first term, we saw proposed tariffs that ultimately gave way to significantly lesser implementations. A similar situation is evolving in Europe regarding defense spending. For instance, the U.S. spend about 3.4% of its GDP on its military, a cost that can skyrocket during times of war.

It’s critically important that we stay informed of these economic trends. Lumber makes up about 17% of the material cost of a new home, and a substantial amount of that lumber used in the U.S. is sourced from Canada. A tariff on Canadian lumber may raise lumber prices universally, increasing the cost of new houses by roughly 5%.

In closing, tariffs are an issue that every real estate investor should keep a close eye on. With the constantly evolving political climate, these factors can have far-reaching implications for both local and international markets across the world. I urge everyone to stay updated and have an awesome rest of your day. Go make some great things happen. We’ll talk again tomorrow!