The Trump administration's proposed 20% tariff on Canadian lumber imports could have the biggest impact on the U.S. home building industry, a sector that has already struggled with higher labor costs since the housing crash a decade ago.
U.S. home builders are among the biggest customers for Canadian lumber, which is a major component in framing single-family homes. Canadian imports represent about 28% of all softwood lumber purchased in the U.S., according to an analysis by the National Association of Home Builders, a trade group.
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Based on analysis last year, a builder spends an average of $15,413 for the softwood lumber in a single-family home, or about 7% of the total construction cost of a home. Lumber cost increases so far this year have added an estimated $3,000 to the cost of building a typical home, according to the home builders' association.
Builders say lumber costs are already at the highest in a decade, even before the prospect of increased tariffs. Labor shortages throughout the housing recovery have already added costs and held back the overall pace of home construction, contributing to rising prices as more buyers compete for a smaller supply of homes.
The prospect of U.S. duties on Canadian lumber imports has driven up prices this year, with lumber futures up more than 25% in the early months of 2017 and peaking at their highest point in over 12 years.
"Someone's paying for this: Either I'm paying for it, or the homeowner is paying for it," said Scott Laurie, president and chief executive of The Olson Co., a home builder in Southern California. "From a buyer's perspective, they're not really interested if lumber is going up or down. They're going to say 'Here's what I'm paying for the house.'"
Home improvement retails Home Depot Inc. and Lowe's Cos. likely won't be hardest hit by any potential tariff on Canadian lumber. Much of their business is focused on home improvement and repair, not home building, the industry most reliant on Canadian softwood lumber.
"The vast majority of our lumber is sourced domestically," said a spokesman for Atlanta, Ga.-based Home Depot.
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(END) Dow Jones Newswires
April 24, 2017 22:37 ET (02:37 GMT)