U.S. News


Trade War with China is Driving up Home Prices

Housing prices in America today are near an all-time high, and home ownership has yet to recover from the 2008 and 2020 recessions. “Yes In My Backyard” (YIMBY) groups have advocated against restrictive zoning in an effort to lower housing costs. But with construction materials making up roughly 60% of a home’s cost, we need to address the problem from another angle.

The U.S. currently has tariffs on important construction materials such as Canadian lumber and Chinese nails and pipes. Eliminating such building material tariffs could deliver a powerful blow to the other side of this housing problem.

Unfortunately, President Biden has other plans. This May, the president announced a new 25% duty rate on Chinese steel, up from 0-7.5%. For comparison, the 5-20% duty rates on Canadian softwood lumber added an extra $24,000 to construction costs in 2021. Construction costs have skyrocketed since 2020, increasing by an average of 20% and outpacing even the highest inflation rate of 8%. Imposing still more tariffs on important construction materials will only further inflate those costs.

Meanwhile, Biden’s plan to decrease housing prices is lackluster at best. His combination of mortgage relief tax credits and down payment assistance is projected to cost $105 billion and will help 3.4 million families. Those numbers sound promising until you realize that the credits are temporary, and the housing crisis is broader than a few million families across America. Additionally, in making housing “more affordable for more people” through tax credits, Biden is flooding the market with new potential buyers. This means that the sellers reap the benefits, not the struggling buyers.

New construction benefits everyone in the housing market. Even if the new houses are mid-level, they encourage people to move out of their starter homes, freeing up the market for first-time homebuyers. First-time homebuyers, likewise, help free up the tight rental market.

The Biden administration argues that these tariffs are necessary to protect American jobs, especially those in the lumber and steel industries. However, removing the tariffs would not eliminate these jobs. American lumber is so expensive in part because the demand is greater than the supply. Additionally, cheaper materials fuel other industries which will need more hard-working Americans. Construction, transportation, and other specialized industries would be free to flourish as more people can afford to build new homes.

In reality, it’s the large corporations in these domestic industries that profit greatly from tariffs placed on their foreign competition. The average worker gets more job opportunities, and the average homebuyer gets a cheaper home. Big corporations simply lose some profit.

Others worry that our national security will be compromised if we do not have a domestic construction material industry. However, Canada is a close ally who would still trade with the U.S. in wartime, and sourcing steel nails and pipes from China is not as risky as semiconductors or war machines. Construction materials do not contain secret domestic intelligence, nor will we be incapable of producing them during a war. Eliminating these tariffs would allow the economy to flourish in the meantime. Foreign and domestic lumber, nails, and pipes are needed in this time of high demand, not just one or the other.

Tariffs should protect the American people, not hurt them. In an economy where basic necessities are becoming harder to come by, it’s time to reconsider why everything costs so much. By removing these tariffs and boosting American construction, we can take one step closer to making America affordable again.