US-China Tariff War

 Last year, the US imposed tariffs on Chinese products.  In retaliation, China implemented their own tariffs on US products.  This back and forth between China and the US didn’t stop there.  Just two weeks ago, Trump raised the tariffs from 10% to 25%.  Of course, China announced increased tariff hikes, some double than before, just last week.  If this continues, we could be looking at a full-on trade war.

The increase in the tariffs, which would represent about $2.5 billion in annual tax increase, directly affect materials for housing construction and the economy.  Construction costs are already high but adding to the high cost with a 25% increase would slow new construction and remodels.  The previous tariff on steel and aluminum had already put a strain on new construction.  With the latest tariffs, some items like appliances and similar products would greatly increase in price, hurting consumers hoping to remodel their kitchen. 

The full list of products affected by the tariffs are long and include agricultural products, medical equipment, and auto products.   These tariffs are being placed on nearly everything Americans buy, making the cost living higher.  Another product that is being hit by tariffs?  Liquified natural gas, the largest export of the United States.  Tariff increased from 10% to 25%, making China look elsewhere for LNG products.  This could hurt the US and threaten our economy, but economist remain optimistic as there are plenty of other buyers of our LNG product. 

However, this trade war can benefit homebuyers by keeping the mortgage rates low.  Low mortgage rates typically entice new homebuyers into the market.  But we likely won’t see as many Chinese buyers.  Chinese investors have outpaced other foreign countries for the last several years in the real estate market.  In last year alone, China represented about 25% of all foreign buyers, with second being Canada at a mere 9%.  With the consistent raising of the tariffs, Chinese buyers are now facing stricter rules on purchases in America.  This will greatly affect our market, along with many on the West Coast.