Tyler Schipper, an associate professor of economics and data analytics in the College of Arts and Sciences at the University of St. Thomas, spoke with Finance & Commerce about tariffs ranging from 10% to 25% that the U.S government is imposing on certain imported goods from various countries, including Canada, China and Mexico. He spoke about how those tariffs, which are meant to bring jobs and manufacturing back to the US, will impact the cost of goods for American citizens.
An example he gave was about expected tariffs on lumber and steel and how that could impact the housing market. The U.S. has already seen in recent years, he said, how the average size of a newly built home in the U.S. has gradually decreased and that is a response of home builders trying to respond to increasing costs.
“When we think about tariffs increasing costs, it might not necessarily show up in the cost of a typical home, but it might show up in terms of cost per square foot, and so consumers will see smaller homes out there because that's what they can get with their dollar.”
From the interview:
“When we have tariffs and people start to maybe feel less good about the economy, that would have a larger effect on people's demand for homes, and that might hurt sales of new homes. But because of this kind of pent-up demand effect where people have been waiting. There's this irony that those same kind of storm clouds are showing up in other ways in the data. In particular, people's expectations about the future are making it so that the yield on the 10-year Treasury is falling, which is bringing mortgage rates down along with it. And so, it's making it so that some of those homeowners that have been on the sidelines might still be willing to jump at a lower mortgage rate.
“So, there are going to be some people that aren't ready to move because they're worried about the state of the economy, but there's also going to be a group of people that are like ‘It's time; we’ve been in this house long enough. We need to move.’ And I don't know which group of those people are going to be more important for the direction of housing prices. I think it's a really interesting moment given everything that's happening.”
