That whooshing sound you hear is homebuilders breathing a sigh of relief.
Canadian President Justin Trudeau announced Monday afternoon that the U.S. and Canada have agreed to pause for one month the 25% tariffs that President Donald Trump placed on Canadian goods. That came mere hours after Trump and Mexican President Claudia Sheinbaum agreed to pause paused 25% tariffs on Mexico.
During the month-long pause, the U.S. will negotiate with both Canada and Mexico for a longer-term arrangement.
It’s welcome news for the homebuilding industry, which relies heavily on imports from both countries. According to data from John Burns Research & Consulting, 20% of hardware imports come from Mexico, while 70% of sawmill wood product imports come from Canada.
In exchange for the pause in tariffs, Canada will beef up border security with the intent of stopping the flow of fentanyl into the U.S. This will include Canada naming a fentanyl czar and the launch of a U.S.-Canada “joint strike force” to address the issue. Canada will also put $200 million toward the effort.
Trudeau said that his country will implement a $1.3 billion border protection plan that was announced in December, which will include 10,000 additional personnel at the border and new technology, including updated helicopters.
Earlier on Monday, Sheinbaum agreed to deploy 10,000 troops to Mexico’s northern border for the purpose of curtailing illegal immigration and drug trafficking.
Leading up to the agreement, Canada had taken a more combative stance toward U.S. tariffs than Mexico. Canada placed its own 25% tariff on U.S. goods in retaliation, and Ontario Premier Doug Ford said prior to the agreement that the province was terminating a contract with Elon Musk’s Starlink.
Financial markets responded poorly to the tariffs over the weekend, with major indices starting Monday down about 2% before rebounding slightly. Homebuilder stocks were hit particularly hard, with major public builders down between 3% and 5% at close. Lumber futures also soared throughout the day.
On Friday, the National Association of Homebuilders (NAHB) sent a letter to the Trump administration asking for a tariff exemption on building materials. While builders have generally been optimistic about reaching a favorable conclusion to the tariff threats, the trade group stressed the negative impact that tariffs would have on home prices.
“While home building is inherently domestic, builders rely on components produced abroad, with Canada and Mexico representing nearly 25% of building materials imports,” the letter stated. “Imposing additional tariffs on these imports will lead to higher material costs, which will ultimately be passed on to home buyers in the form of increased housing prices.”
A 2018 analysis from NAHB estimated that tariffs added roughly $9,000 to the cost of building a single-family home, with the cost of lumber increasing by almost 80% year over year at that time.
In regard to fentanyl, the deal with Mexico is more significant. According to data from U.S. Customs and Border Protection cited by CNN, only about 0.2% of fentanyl seized by authorities comes across the Canadian border, compared to 96.6% across the Mexican border.
