How Tariffs Are Affecting the US Real Estate Market in 2025

Introduction

2025 is hot for the US housing market – not just from demand but from tariffs. With record tariffs on steel, aluminum, lumber and electronics, builders and developers are facing new challenges. These rising costs are changing how homes and buildings are being planned, priced and delivered globally. In this article we will break down how these construction material tariffs in 2025 are impacting everything from home prices to investor decisions in the broader context of international trade and economic policy.

What Are Tariffs and How Do They Increase Costs?

Tariffs are taxes on imported goods, or import duties. When the US government raises duties through tariff increases, it increases the cost of bringing in products from other countries. In 2025, tariff rates on construction materials like steel (25%), aluminum (10-25%) and softwood lumber from Canada (14.5% and rising) are putting financial pressure on domestic industry stakeholders.

It’s not just raw materials. Electronics and home appliances – often imported from China, South Korea and members of the European Union – are seeing price increases due to these import tariffs. These price hikes are part of a broader tariff war that has escalated over the past few years.

The China Tariffs

Many of these tariffs are from China tariffs. China have targeted electronics, tools and various goods used in residential and commercial construction. Former President Donald Trump started this round of tariffs under a presidential memorandum in 2018, citing trade deficits and national security as reasons.

In 2025, Vice President JD Vance is continuing to support tariffs as part of a broader push to support American competitiveness and revive the industrial base. Treasury Secretary Scott Bessent told investors recently that these measures are meant to protect domestic producers and reduce dependence on foreign producers.

Free Trade vs Tariff Policy

Free trade policies aim to minimize customs barriers between trading partners, encouraging export and import flows. In contrast, US trade policy has shifted to protecting industries at home. Policymakers argue that tariffs on foreign trade barriers and non-tariff barriers help level the playing field for domestic producers.But economists warn that too many tariffs disrupt global supply chains and the global economy. Imported goods become more expensive and retaliatory measures from other countries can impact American exports – from agricultural products to industrial components.

Harmonized Tariff Schedule (HTS) and HS Code

The Harmonized Tariff Schedule, based on the global Harmonized System (HS), categorizes all imported products for customs purposes. This system is enforced by US Customs and Border Protection and guided by the International Trade Commission. Builders rely on accurate HS codes to make sure they pay the right duty rate and avoid penalties or delays.

Errors or changes in classification – especially on critical minerals or imported products used in home construction – can have big cost implications for public and private sector projects.

Negotiating Tariffs in Trade Talks

The US is negotiating through international trade talks, often under the umbrella of the World Trade Organization. These talks aim to address trade surplus concerns, enforce reciprocal trade agreements and eliminate foreign trade barriers.

The White House has said it’s open to lowering tariffs on certain imported goods if trading partners lift restrictions on American exports. Trade policy changes are often formalized through executive orders and require coordination with other members of the administration and Congress.

Duty Rates and Domestic Industry Impact

Duty rates are a key part of economic policy. While intended to help domestic production and protect the customs territory from foreign competition, they also increase costs for the domestic industry. Builders – especially those sourcing materials internationally – need to account for rising costs due to changing tariff rates and import duties.

Lower Tariffs as a Policy Solution?

Some experts suggest lower tariffs could ease pressure on the housing market and make homes more affordable. Reducing them on construction materials could give more flexibility to exporters and reduce price spikes in imported goods – from appliances to building materials.

This could also restore balance in the private sector by giving access to more competitive prices while protecting strategic sectors like critical minerals.

Wall Street’s Take on Tariffs

Wall Street is still assessing the impact of tariffs on real estate and construction. According to the Associated Press and the Census Bureau, housing starts and new development permits have slowed down, worrying investors.

Analysts say ongoing trade wars, combined with restrictive tariffs and global economic uncertainty, are dampening confidence in the real estate sector. Bessent told investors that relief could come from a coordinated policy shift towards trade liberalization.

HS Code: The Backbone of Trade Classification

Each product imported is assigned an HS code used across the largest economies for duty calculation and trade tracking. The International Emergency Economic Powers Act gives the President authority to adjust trade policy in response to foreign threats and builders need to stay on top of these changes.

Mishandling HS codes – especially for imported products like alcoholic beverages, appliances and energy systems – can cause delays and unexpected expenses.

Construction Costs

Construction costs are rising and tariffs are a big part of it. The National Association of Home Builders (NAHB) estimates that tariffs have added $9,200 to $10,900 to the cost of a new home. The price increase is not just from direct tariffs but also from supply chain disruptions and customs barriers that limit access to cheaper foreign goods.

Housing Affordability and Tariffs

Housing affordability is being squeezed by inflation . The cost burden of tariff increases is felt most in affordable housing segments. Developers are passing on the added expenses to homebuyers, reducing availability and making homeownership less attainable.

High tariff rates on everything from Chinese goods to industrial components have made it harder for developers to build affordably, despite government support for domestic industry.

Construction Delays

Delays in material delivery are compounded by stricter customs enforcement and a more complex international trade landscape. Builders face longer lead times and higher risk exposure as tariffs and trade policy changes impact global supply chains.

Builders in the US are adjusting project timelines due to trade war disruptions, especially when importing from countries like China, South Korea or European Union members.

Real Estate Investor Sentiment in 2025

Investor sentiment has cooled off with rising costs and global uncertainty. Domestic producers like tariffs but foreign competition is wary. Investors are watching trade talks closely hoping for resolution before deeper economic consequences kick in.

Regional Housing Market Impact of Tariffs

Regions most dependent on imported materials – like the Northeast and Great Lakes – are seeing bigger price increases. Areas with stronger domestic supply chains may benefit from new investments especially as demand for domestic production grows.

Tariffs on foreign-sourced inputs are changing how regions plan housing developments, especially in global trade hubs where customs territory rules are strictly enforced.

Conclusion

Tariffs on materials are hitting the US real estate market hard in 2025. These policies affect everything from construction delays to affordability issues as builders adjust to a global economy in flux.

From the Harmonized Tariff Schedule to HS codes and trade talks at the WTO, the intersection of economic policy and real estate has never been more complicated. As the White House and trading partners negotiate, the outcome will decide home affordability, domestic industry and US competitiveness.