What the New Steel and Aluminum Tariffs Could Mean for the Construction and Housing Market

Reader Contribution by Kayla Matthews
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The unexpected announcement earlier this month of new tariffs on imported steel and aluminum could impact prices for the U.S. construction, infrastructure and housing markets. Protectionist trade policy, introduced by the White House to boost domestic production and add new jobs, will impose a 25 percent tariff on steel imports and a 10 percent tariff on aluminum.

Following through on a key campaign promise and rattling stock markets, this is the latest of aggressive trade policy changes, preceded by the U.S. exit from the Trans-Pacific Partnership and the renegotiation of the North American Free Trade Agreement (NAFTA).

Why Tariffs, and Why Now?

Messaging from the federal government initially declared no country, including Canada and Mexico, would be exempt from the tariffs unless the U.S. can negotiate a better deal with NAFTA. The Trump Administration has since announced Canada and Mexico will now be exempt from the tariffs — undoubtedly a relief for Canada, which produces 16 percent of U.S. steel and 41 percent of U.S. aluminum.

Speaking at a White House meeting, Trump said no one truly understands how badly other countries treat the U.S., and that “disgraceful” trade policies have obliterated the country’s capacity to produce vital commodities. “When our country can’t make aluminum and steel,” he said, “you almost don’t have much of a country.”

The U.S. is the world’s largest steel importer, and even though it relies on shipments from more than 100 countries and territories, Trump has singled out China previously as a threat to domestic trade and did so once again in his statement.

China accounts for 2 percent of 2017’s steel imports, following Obama Administration-era 2016 trade taxes of various types on imported steel, causing imports from China to drop by almost 66 percent.

Aluminum remains another matter. China is the fourth-largest supplier to the U.S., equaling $389 million in 2016, according to a February report from the Department of Commerce.

The Effect on State Economies, Construction Projects and the Housing Market

As expected, speculation on the domestic effects of these tariffs is flooding the media, and advisers have been bitterly divided over how to proceed, given the potential ensnarement of allies such as the EU.

Industries in the U.S. — namely, automakers, food packagers and construction — have pushed back on the tariffs for months, stressing that not only will they prompt retaliatory trade actions, but without cheaper imports, their costs will increase, eating into profits and forcing prices to rise or workers to be laid off.

The National Association of Homebuilders is among several trade organizations that spoke against the import taxes, claiming higher steel costs will raise construction costs for its members, and then get passed onto homebuyers.

The construction industry, it seems, is still finding its way through the April 2017 tariffs the White House imposed on the five Canadian lumber companies. In retaliation to Canada’s U.S. dairy import restrictions, lumber prices have since increased 31 percent, which, compounded by higher steel prices, could price some homebuyers out of the market.

The construction industry — accounting for 43 percent of all steel shipments in the U.S., including over 345 billion shipments in 2013 of certain steel products — is currently unable to meet demands for housing as it is, and the hike in prices means the shortage of affordable housing has created some fierce competition. Reports include bidding wars on houses people haven’t even viewed yet. Mortgage rates are now rising, and the national average earlier this month was 4.28 percent, an increase of 3.85 percent at the start of 2018.

However, on the flipside, not all building projects use a huge amount of steel. Single-family homes require more wood than metal, and steel and aluminum only contribute between 0.5 percent and 1 percent of a home’s cost. Larger buildings such as flats and skyscrapers will experience more effects from the tariffs.

Scott N. Paul, president of the Alliance for American Manufacturing, is one individual who support these tariffs, releasing a statement saying, “enforcement action must be broad, robust and comprehensive.” Meanwhile, Democratic Sen. Sherrod Brown of Ohio also defended the move, calling the news “long overdue” for steelworkers in his state.

A Summation So Far

Speculation will continue, since no one really knows what’s going to happen and how exactly tariffs will affect the construction and the housing markets. Lumber tariffs seem to have already taken their toll on rural and suburban housing costs, but as it stands, it seems larger projects in cities will experience the direct cost hike of rebar and cladding.

We will know more after the administration has defined tariffs more clearly, once the White House has issued its infrastructure plan and once an infrastructure bill has been passed.

Kayla Matthews writes and blogs about healthy living and has an especially strong passion for helping others increase their mental health and happiness by improving their daily productivity and positivity. To learn more about Kayla, you can follow her on Google+Facebook  and Twitter and check out her most recent posts on Productivity TheoryRead all of Kayla’s MOTHER EARTH NEWS posts here.

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