Trump tar­iffs will make build­ing, re­mod­el­ing pricier

Boston Herald - - HOME SM@RT - Ken­neth R. Har­ney

WASH­ING­TON — Think­ing about re­mod­el­ing your home — re­do­ing a bath­room or the kitchen? Or maybe pur­chas­ing a new home from a builder? Or sim­ply buy­ing new ap­pli­ances?

Then get ready to dig deeper into your wal­let as the Trump ad­min­is­tra­tion’s new $200 bil­lion in tar­iffs be­gin to flow through to hun­dreds of the prod­ucts that go into your planned pro­ject. They range from iron nails to floor­ing to gran­ite coun­ter­tops, tiles, sinks, roof­ing, ce­ment, paints, cab­i­nets, wooden and steel doors, win­dows, light­ing, ap­pli­ances and much more. And get ready to ne­go­ti­ate with re­mod­el­ers and builders about “al­lowances” and es­ca­la­tion clauses as ven­dor pric­ing and avail­abil­ity of th­ese im­ports be­come more dif­fi­cult to pre­dict.

New es­ti­mates from the Na­tional As­so­ci­a­tion of Home Builders in­di­cate that of the 6,000 items on the list of goods im­ported from China that are now sub­ject to tar­iffs, 463 are “ubiq­ui­tous” in home con­struc­tion and re­mod­el­ing. They to­tal roughly $10 bil­lion in ex­pen­di­tures a year na­tion­wide. If the White House raises the tar­iff to 25 per­cent from the cur­rent 10 per­cent early next year as threat­ened, “the in­dus­try­wide cost in­crease would be $2.5 bil­lion,” ac­cord­ing to David Lo­gan, di­rec­tor of tax and trade pol­icy anal­y­sis for the home builders group.

Tim El­lis, pres­i­dent of T.W. El­lis, LLC in For­est Hill, Md., a re­mod­el­ing firm that spe­cial­izes in kitchens and home ad­di­tions, es­ti­mates that the lat­est round of tar­iffs — along with the ex­ist­ing levies on Cana­dian lum­ber — now af­fect some­where be­tween 15 per­cent and 20 per­cent of the prod­ucts in a typ­i­cal pro­ject for his firm. They have the po­ten­tial to in­crease costs to the con­sumer by any­where from 5 per­cent to 10 per­cent or more, de­pend­ing upon what the client se­lects.

“We are try­ing to ab­sorb as much as we can un­til it starts to re­ally im­pact our bot­tom line,” he told me. But like other re­mod­el­ing firms, El­lis is also in­clud­ing flex­i­ble “al­lowances” in con­tracts that, in the event of big price hikes to tar­if­faf­fected prod­ucts, give clients the flex­i­bil­ity to shift to al­ter­na­tive prod­ucts that are not sub­ject to the ad­don levies.

For ex­am­ple, if the quartz or gran­ite spec­i­fied in the orig­i­nal job by the client has the po­ten­tial to be­come much more ex­pen­sive — or dif­fi­cult to ob­tain — the con­tract might con­tain lan­guage that al­lows a shift to al­ter­na­tive sources that are not sub­ject to tar­iffs. El­lis calls it “skat­ing around the tar­iffs” on im­ports from China.

Bill Mill­hol­land, ex­ec­u­tive vice pres­i­dent of Case De­sign/Re­mod­el­ing, says “we try to be hon­est with clients” but the tar­iff sit­u­a­tion “puts us in a quandary. Do we bake in the 10 per­cent” in­crease ex­pected from sup­pli­ers of Chi­nese prod­ucts, or, look­ing months ahead, “do we bake in 25 per­cent?”

The Cana­dian wood tar­iffs are es­pe­cially trou­ble­some for re­mod­el­ings that in­volve ex­ten­sive fram­ing and car­pen­try work. They’re al­ready adding $2,000 to the price of a typ­i­cal new home, ac­cord­ing to Lo­gan. Kitchen cab­i­net prices have un­der­gone mul­ti­ple in­creases in re­cent months. Mill­hol­land said they are al­ready adding “sig­nif­i­cant” bumps to the prices of cus­tom cab­i­netry along with other com­po­nent in­creases. The “dirty lit­tle se­cret” in the in­dus­try is that “ven­dors started to ramp up prices” on var­i­ous com­po­nents even be­fore the lat­est round of tar­iffs took ef­fect, he noted.

Mill­hol­land es­ti­mates that 40 per­cent of the ma­te­ri­als in ma­jor kitchen or bath­room re­mod­el­ings are now af­fected by the tar­iffs. If a pro­ject is ex­pected to cost $100,000, for in­stance, then $40,000 of the prod­ucts in the job could be sub­ject to tar­iffs, whether this year’s 10 per­cent tar­iffs or next year’s 25 per­cent.

The sober­ing bot­tom line: The tar­iff war is on. Build­ing and re­mod­el­ing are get­ting whacked, and the costs to you could go even higher soon.

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