Fluctuating fees on steel, aluminum, and lumber are exacerbating uncertainty
As Malibuites whose homes burned in the Palisades and Franklin fires grapple with determining whether they can afford to rebuild, recent tariffs imposed by the United States on imports of steel, aluminum, and lumber — all materials needed to build a home — have injected troublesome uncertainty and angst to their calculations.
Although it may be several months before any of those rebuilding break ground due to permit application processes, fire victims calculating the costs of rebuilding must weigh the possible prices for construction materials. If there’s one thing that Malibu fire victims and Wall Street investors have in common, it is that they abhor volatility in the tariffs space because it disrupts their economic projections. Over the past few weeks, President Donald Trump has threatened, imposed, suspended, and resumed tariffs on America’s largest trade partners: Canada, Mexico, and China, countries that also are the biggest suppliers of drywall, lumber, and steel, materials needed to rebuild Malibu homes. Whatever one thinks of the policies underlying the tariffs, the uncertainty couldn’t come at a worse time for Malibu’s fire victims.
Running the numbers
According to the National Association of Home Builders, Mexico is a major source of lime and gypsum products. Noting that gypsum is used for drywall, the association reported that 74% of those products used in American homebuilding originated in Mexico in 2024. The group also stated that of $8.2 billion worth of sawmill and wood products imported in 2024, nearly 72% of those imports came from Canada.
“Further aggravating the situation, the tariffs imposed on Canadian products, which include softwood lumber critical to the U.S. homebuilding industry, are on top of the existing 14.5% lumber tariffs previously imposed by the U.S. Department of Commerce,” wrote Alex Strong, a senior NAHB director focusing on federal legislative policy matters.
Elaborating, Strong noted that the Department of Commerce, “has signaled that it plans to roughly double the 14.5% tariff later this year, possibly in September, which, in addition to the 25% tariff would mean that the overall tariff rate on Canadian softwood lumber will rise above 50% in the fall and could approach 60%.”
Canada is also a top supplier of steel, according to the American Iron and Steel Institute. Electronics and metal come from China. A 25% U.S. tariff on imports of steel and aluminum from all countries took effect on March 12, per executive orders signed by Trump. He threatened to raise that tariff to 50% for Canadian imports of metals, but reconsidered after Canada suspended a new tax on U.S.-bound electricity and the countries made plans for new trade talks.
Malibu’s Reiff Anawalt talks tariffs’ effects on building supplies
Anawalt Lumber has been in business for more than one hundred years. On March 6, local Fox News Channel 11 interviewed owner Reiff Anawalt at his Malibu store regarding whether fire lot rebuilding costs could increase due to lumber tariffs.
“We will see demand due to rebuilding that is very high in six months to a year and a half and we also will have the tariffs so we will have a double whammy,” Anawalt stated. “People projecting numbers at a current price need to shoot for a 25 percent higher price for labor and material costs going up.”
There is a lot of consensus in the financial industry supporting Analwalt’s projections. Bank of America analysts revealed in a March 9 note that building product manufacturers — those who make the equipment and supplies that go into and around homes — have announced price increases over the past several weeks in response to Trump’s March 4 executive order for tariffs on goods imported from China, Canada, and Mexico, according to an article published by Fortune.com. On March 6, Trump confirmed the U.S. would pause until April 2 any tariffs on goods and services that comply with the United States-Mexico-Canada Agreement (USMCA), the agreement that replaced NAFTA in the first Trump administration.
Market analysts have stated that expenses are increasing for homebuilders because global trade is changing, impacting imports of steel and copper — materials used for appliances and plumbing respectively.
Zonda, a company that provides data and market-research tools concerning new home construction in North America, said in a March 5 communication to clients that tariff policies have resulted in “heightened economic uncertainty, particularly for those industries that rely on cross-border supply chains, including homebuilding.” Zonda’s national builder survey in February asked builders how concerned they were about tariffs and close to 90% of respondents expressed some level of worry.
Supply chains for construction materials including lumber, steel, and aluminum could be disrupted and those materials could see more price hikes, the communication said, adding that, “The new tariffs pose a significant risk to our industry, as they are expected to drive up the already elevated cost of building materials.”
The statement also recounted information about companies that have announced price hikes, including Masco, a building products manufacturer that announced an incoming 7% to 9% price hike for plumbing-related items, many of which are sourced from China or other parts of Asia. Bank of America stated in an advisory that Delta Faucet Company, a Masco subsidiary, informed customers that there will be a price increase for its products in May, even though the company increased prices in January.
Recent and distant history instruct that tariffs increase homebuilding costs
When the Trump’s first administration imposed tariffs on Canadian lumber imports, a surge in lumber prices ensued, resulting in an estimated $9,000 extra costs in the average prices of a new single-family home, according to the National Association of Home Builders, which noted at the time that homebuilders passed those increased cost on to homeowners.
Forty years ago, President Ronald Reagan warned of tariffs causing “inefficient markets.” For an interesting read discussing his concerns, readers may wish to review, “Ronald Reagan’s comments about tariffs ring true about the US Steel Industry today,” by Adam Button for forexlive.com on March 3.
Whether one agrees with Reagan and economists weighing in regarding the current unpredictability regarding imposition of tariffs, suffice it to say, the last thing those fire victims who are grappling with whether to rebuild need is the additional stress and uncertainty caused by tariff fluctuations.