Tariffs to Raise Cost of Rebuilding After Hurricane Florence

When the floodwaters from Hurricane Florence recede and rebuilding kicks into high gear, homeowners and businesses will face an additional burden as tariffs imposed by the Trump administration drive up the cost of construction materials.

Homebuilders and contractors say the administration’s trade policy will add to the price increases that usually follow natural disasters. In addition to materials like lumber, steel and aluminum, the United States will impose tariffs on $200 billion in Chinese imports next week, including countertops, furniture and gypsum, a key ingredient in drywall. All told, some builders estimate that construction costs could be 20 to 30 percent higher than they would have been without these tariffs.

“We’re all going to pay the price for it in terms of higher construction costs,” said Alan Banks, president of the North Carolina Home Builders Association.

Perhaps the biggest impact will come from wood prices, which are up 40 percent from a year ago. The Trump administration imposed a 20 percent tariff on Canadian softwood lumber late last year, and supply shortages have also driven up prices.

Builders are also hurting because of the 25 percent tariff on imported steel that went into effect this year and a 10 percent levy on aluminum.

Even before the storm, the tariffs forced Skip Greene, a contractor in Kinston, North Carolina, to suspend one major project, an apartment building for teachers, as costs surged. Now, with his crews putting up new roofs and cutting out wet Sheetrock this week, Greene anticipates further price increases as demand for building materials grows.

“In the short term, it is definitely hurting us,” Greene said. “I hope that going through all this pain is worth it in the end. We’ve got a tariff war going on with China and Canada, and the result was that I couldn’t move ahead with building affordable housing.”

With 30 employees working between Raleigh and the North Carolina coast, Greene’s firm, Group III Management, will be busy for a while. Greene has long overseen projects for the federal government as well as for homeowners and businesses.

In Kinston, Greene said the Neuse River was supposed to crest Friday night but had already overflowed its banks. “There’s maybe one road open,” he said. “We’re surviving, we’re coping.”

It will take months to repair the damage from the floods, he said. “We intend to pass on the price of rebuilding to insurers, but that will be reflected in higher premiums,” he said. On government projects, he added, “we, as taxpayers, will pay.”

With most of the damage coming from flooding rather than wind, insurers will pick up only a small portion of the cost of rebuilding. Standard homeowner’s insurance policies exclude flood damage, and out of the millions of homes in the Carolinas, only 335,000 are covered by the National Flood Insurance Program.

“The people that will get hurt the worst are the ones who are least able to afford rebuilding,” Greene said. “They’re blue collar, and they tend to live in lower-lying areas, and are less likely to have insurance. It breaks your heart.”

Trade tensions with Canada over lumber imports date back decades. But U.S. lumber businesses contend that Canada subsidizes the wood industry, keeping production artificially high and depressing prices in the United States.

Given that domestic production supplies only about two-thirds of the country’s needs, the home building industry argues that the tariffs make no sense. “With increased demand and the constraints on Canada, we have grave concern that prices could spike again,” said Jerry Howard, chief executive of the National Association of Home Builders.

“We’re impacted by all of the tariffs, but lumber is the main one,” he said. “In a single-family home, lumber is the No. 1 component.”

In a statement, Jason Brochu, co-chairman of the U.S. Lumber Coalition, played down the threat of higher prices.

“There is ample capacity in the United States to supply wood to help rebuild American homes and business affected by these storms,” he said. “American lumber producers across the country stand ready to help Carolina cities and communities rebuild.”

Contractors are also bracing for the 10 percent tariff the federal government will impose on $200 billion in Chinese imports starting Monday; the duty will jump to 25 percent in January. The list of affected products runs to nearly 200 pages and includes products like flooring, furniture, ceramic tiles and textiles that go into drapes and curtains.

“In a lot of these cases, American companies don’t make these products anymore, so no domestic industry will benefit,” said Chad P. Bown, a senior fellow at the Peterson Institute for International Economics. “The tariffs compound the situation these struggling homeowners face after the hurricane.”

Like many Americans, contractors are divided on the wisdom of President Donald Trump’s trade policies, complaining about higher prices even as they echo his complaints that other countries have taken advantage of the United States and hurt its businesses and workers.

Bob Morgan, owner of Paragon Building in hard-hit Wilmington, North Carolina, said his price quotes were good for only two weeks because lumber costs had been rising so fast. Still, he supports the president’s approach.

“I do know that China has been abusing us,” Morgan said. “I don’t want everybody to pay more, but what Trump is trying to do is make us more competitive, so it’s not automatically cheaper to make everything in China.”

He added that the media wasn’t giving the president the benefit of the doubt on trade. “Trump could walk across the Potomac and the press would say Trump can’t swim,” he said.

But other contractors say the president’s confrontational posture on trade is harmful.

The United States needs to address trade imbalances, but not by raising tariffs, said Charles T. Wilson III, a third-generation builder in Durham, North Carolina.

“Not only does it drive up costs,” he said, “but it creates uncertainty.”

He switched from quartz to granite countertops after the administration imposed tariffs this summer. But the latest duties on Chinese goods will include many granite products. “We’re telling clients to factor in price increases of 7 to 10 percent a year,” Wilson said.

“The tariffs don’t help anyone,” he added. “They’re not the correct tool to negotiate trade policy.”