The stakes couldn't be higher as the U.S. homebuilding industry braces for potentially seismic shifts under the incoming Trump administration. With new trade and immigration policies on the horizon — including higher tariffs on construction materials and stricter deportation measures — the industry faces a perfect storm of cost and labor challenges.

A recent Wall Street Journal analysis by staffers Elizabeth Findell and Gina Heeb notes:

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.

Another key home-builder import from both Mexico and Canada is cement. The U.S. imported $512 million of cement from Canada and $254 million from Mexico in 2022. Gypsum, which is used to make drywall, is also imported from both countries and has already jumped nearly 50% in price since 2020, NAHB said."

Compounding these risks is a current market practice that has left homebuilders with little financial buffer to absorb further shocks. To catalyze buyer decisions amid affordability pressures, many builders are trading off approximately 7% of their net per-home margins to “buy down” homebuyers’ mortgage rates, reducing them from the mid-6% range to mid-4%.

While this strategy has kept sales moving, it effectively uses builders’ margins as “shock absorbers,” leaving minimal room to navigate rising input costs or unforeseen disruptions in the supply chain.

Can and will the center hold, even presupposing welcome relief comes as promised on the regulation, taxation, and Fed policy rate fund fronts?

Ken Pinto, principal at Kenzai USA and a leading authority in construction supply chain and sourcing strategies, spoke with The Builder’s Daily about how builders can prepare for these challenges. Pinto, known for applying Total Quality Management (TQM) principles to global construction sourcing, offers actionable insights into mitigating the impacts of tariffs, hardening supply chains, and addressing the broader resilience imperative for U.S. homebuilders as 2025 approaches.

This discussion delves into the far-reaching consequences of supply chain volatility, provides practical preparation strategies, and underscores why resilience is critical for a sector under increasing economic and societal pressure to deliver attainable housing.

Q&A with Ken Pinto

Q1: How are manufacturers and distributors preparing for increased tariffs in 2025?

Ken Pinto:

Preparation right now is speculative at best. Many manufacturers are shifting operations to countries like Vietnam, India, and Malaysia, reducing reliance on China. Still, raw materials and commoditized products like copper wire remain vulnerable to price volatility. What we’re seeing is ‘runaway train’ pricing strategies, where one player raises prices, hoping others follow. If tariffs happen, prices will rise across the board.”

Q2: What specific materials or components do you see as most affected by tariffs?

Ken Pinto:

Key imports like softwood lumber from Canada, gypsum for drywall, and components for products like light fixtures are at risk. Many manufacturers simply don’t have viable nearshoring options, so they’ll absorb tariff impacts and pass costs to buyers. The lumber supply chain, for instance, is hand-to-mouth—there’s no buffer. Any disruption will magnify impacts significantly.”

Q3: How should builders respond to these potential price increases and supply chain disruptions?

Ken Pinto:

Builders must embrace proactive strategies like maintaining buffer inventory levels, investing in supplier relationships, and staying flexible. Unfortunately, despite lessons from COVID-19, inventories remain low, leaving the industry vulnerable to shocks. Builders also need purchasing teams trained to negotiate effectively in volatile conditions.”

Q4: What are the risks associated with stricter deportation policies for the construction workforce?

Ken Pinto:

Deportations could cause labor shortages and site disruptions. I’ve seen job sites grind to a halt just because a customs vehicle showed up. Even legal workers scatter to avoid the hassle. Builders should be prepared for potential ripple effects, but I hope Trump’s construction background will make him sensitive to these risks.”

Q5: Why is it important for builders to prioritize supply chain resilience now?

Ken Pinto:

With rising demand for both single-family and multi-family housing, the industry can’t afford production slowdowns. Tariffs and labor policies aren’t just cost issues — they’re existential risks. Builders must harden their systems now to sustain operations and deliver housing at attainable price points.”

Q6: How can builders leverage this time of uncertainty as an opportunity for innovation?

Ken Pinto:

The silver lining is that uncertainty often drives innovation. Builders can focus on product decisions that reduce costs, improve cycle times, and enhance quality. Collaboration between manufacturers, marketers, and construction teams can uncover competitive advantages that set companies apart.”

Takeaways

• Proactive Inventory Management: Low inventory levels leave the industry vulnerable. Builders must work with suppliers to create buffer stock for critical materials.
• Strategic Flexibility: Adapting to shifting supply chains, tariffs, and labor policies requires agile purchasing strategies and cross-functional collaboration.
• Long-Term Resilience: Building systems that can absorb price shocks and labor disruptions is essential for maintaining competitiveness and meeting housing demand.
• Opportunity in Challenge: Uncertainty can catalyze innovation. Builders should focus on solutions that align with cost reduction, quality improvement, and faster delivery cycles.

As the industry moves toward 2025, strategic leadership and operational resilience will determine which builders thrive amid turbulence. Ken Pinto’s insights remind us that preparation today is critical for a sustainable tomorrow.