Declaring it a “Liberation Day” for American workers, President Donald Trump on Wednesday announced sweeping new tariffs that could impact home prices and mortgage rates.
“Our country and its taxpayers have been ripped off for more than 50 years, but it is not going to happen anymore,” Trump said in remarks at the White House’s Rose Garden. “With today’s action, we are finally going to be able to make America great again, greater than ever before.”
The new “reciprocal” tariffs, effective at midnight, include a minimum 10% baseline tax on most trading partners, with proportionally higher levies on goods from countries that impose additional tariffs on U.S. goods. All imported vehicles will also face a 25% import tax, he said.
The new tariffs bring the total tax on goods from China to 54%, the White House said. Canada and Mexico, the two largest U.S. trade partners, were exempted from Wednesday’s announcement, but will face the 10% baseline rate after Trump terminates his temporary 25% tariffs on the two neighbors, recently imposed on some goods for national security purposes to halt the flow of illegal fentanyl.
Tariffs, which are taxes on imported goods, are typically paid to the government by the local business importing those goods. In most cases, the cost is passed along to consumers in the form of higher prices.
Trump has said that his goal with the new tariffs is to level the playing field for American-made products and spur a renaissance for U.S. manufacturing, and the White House says that evidence from Trump’s first term shows that tariffs boost the economy without stoking inflation.
Still, some economists fear the new trade barriers could raise the cost of everyday goods and disrupt complex global supply chains.
What tariffs mean for home prices
For the housing market, the new tariffs could mean higher construction costs for homebuilders, to the extent that they impact the imported materials used in home construction.
The National Association of Home Builders (NAHB) estimates that about 10% of of building materials used in residential construction are imported.
“The US faces a supply gap of nearly 4 million homes, and the only long-term solution to this problem is to build them, but the implementation of these tariffs will make it more costly to do so, putting a question mark on whether they can be built at the lower price points that are most undersupplied,” says Realtor.com® Senior Economist Joel Berner.
“Homebuyers are already stretched thin by high listing prices and mortgage rates, so even this relatively small increase in cost will keep many of them on the sideline who may have otherwise become buyers in 2025,” he adds.
Berner estimates that almost $10,000 of the cost of a new home today is due to tariffs, including a 14.5% tariff on Canadian lumber that pre-dates Trump’s second term.
The NAHB estimates that 72% of imported lumber comes from Canada, and 74% of imported gypsum—used for drywall production—comes from Mexico.
“The ability of American homebuilders to produce affordable new inventory is directly linked to their ability to import key materials from our neighboring countries,” says Berner.
Fortunately for new-home shoppers, Canadian lumber is currently exempt from the 25% national security tariff Trump has imposed on that nation.
However, it’s unclear whether the baseline 10% “reciprocal” tariff will be added to lumber once it takes effect for Canada, and the NAHB has said some its members have reported that they are planning for tariffs to increase material costs between $7,500 and $10,000 on the average new single-family home.
In February, the national median sales price of new homes in the U.S. was $414,500, compared to the national median sales price of $398,400 for previously owned homes.
What tariffs mean for mortgage rates
Tariffs could also impact mortgage rates, if they keep inflation higher for longer, as many economist fear they will.
Prolonged inflation would prompt the Fed to reduce or reverse future cuts to its policy rate, which all else equal would keep mortgage rates higher for longer.
Average rates on 30-year fixed home loans have remained above 6.6% since late October, due in part to inflation data that continued to run hotter than expected.
Mortgage rates have remained high in defiance of Trump’s campaign vow to bring them down to 3%, or even lower, although presidents typically have no direct control over borrowing costs.
Trump has said he wants to bring down the yields on the long-term government bonds that tend to dictate mortgage rates. That could be accomplished by either reducing the federal deficit, lowering inflation, or slowing economic growth—or some combination of the three.
The Tax Foundation, a conservative-leaning think tank, has estimated that 10% universal tariffs would raise $2 trillion in government revenue through 2024, which would not be enough to fully offset the revenue losses of extending income tax cuts from Trump’s first term, which Republicans have vowed to do.
In 2025, a 10% universal tariff would increase costs for US households by $1,253 on average, the Tax Foundation estimated.
That inflationary effect could drive mortgage rates higher. On the other hand, if tariffs drive the economy into recession, as some economists fear, mortgage rates would be likely to decline.