Construction Industry Braces for One-Two Punch: Tariffs and Deportations - WSJ [View all]

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MCKINNEY, Texas—Two decades ago, this booming suburb on the northeastern edge of Dallas was a small town accessed by only a two-lane highway. Now, 200,000 people fill its sprawling subdivisions, with new construction everywhere. McKinney, like the country’s other fastest-growing cities, is a town built by imported labor and home to an industry hooked on imported steel and lumber. That leaves the construction industry particularly vulnerable to President-elect Donald Trump’s vow to deport millions of undocumented immigrants, and his threats to introduce new tariffs on Mexico and Canada.

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The McKinney mayor, who describes himself as a Reagan Republican, said he would prefer all workers to be documented and would like to see more materials produced in the U.S. But he said he thought a heavy-handed approach of deportations and tariffs would be a painful way to advance those goals.

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Trump, a former real-estate developer himself, has said he would support the construction industry by easing regulations and allowing more building on federal land. But many economists and builders say the loss of the immigrant workforce would drive up the cost of wages for some positions and leave others unfilled. On top of that, the president-elect’s proposed tariffs of 25% on Canada and Mexico could increase the cost of construction materials.

Overall, about 7.3% of home-building materials are imported, according to the National Association of Home Builders. Softwood lumber, used to frame buildings, often comes from Canada, which now has a tariff of 14.54%. The U.S. is also the world’s top importer of the crucial housing materials iron and steel. About a quarter of America’s $43 billion in imported iron and steel came from Canada as of 2022, according to the Observatory of Economic Complexity.

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Still, home builders are already starting to brace for deportation and trade policies. Industry lobbyists have warned the Trump transition team that the policies could have a chilling effect on builders and the overall market, a person familiar with the matter said. Builders said they would pass at least some of the increased costs on to home buyers, when prices are already near record highs and mortgage rates are on the rise again.

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