Last week, President Donald Trump announced the U.S. will impose a 25% tariff on steel imports and a 10% tariff on aluminum.
And while many expected the president to change his mind over the weekend, however that has not been the case.
Friday, and again Monday morning, the president showed his renewed commitment through several tweets, saying the U.S. is being taken advantage of by European nations and even our neighboring countries, Mexico and Canada.
If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S. They make it impossible for our cars (and more) to sell there. Big trade imbalance!
— Donald J. Trump (@realDonaldTrump) March 3, 2018
We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed. Also, Canada must..
— Donald J. Trump (@realDonaldTrump) March 5, 2018
…treat our farmers much better. Highly restrictive. Mexico must do much more on stopping drugs from pouring into the U.S. They have not done what needs to be done. Millions of people addicted and dying.
— Donald J. Trump (@realDonaldTrump) March 5, 2018
Since announcing the new tariff, Republican lawmakers and conservative groups have spoken out against Trump’s decision, however the president continues to support his decision, saying he is not backing down.
So what does all of this mean for housing? January’s employment report from the U.S. Bureau of Labor Statistics showed wages increased at a rate of 2.9%, the highest annual increase since 2009, nearly solidifying a rate hike in March.
Now, as the Federal Reserve continues to watch inflation rates to determine its next move, a trade war and increase in tariffs could cause companies to pass increased costs on to their customers, creating a surge in inflation.
This could then lead to the Fed increasing interest rates at a faster pace. In a worst-case scenario, the Fed overtightening has historically led to recessions. But even without a recession risk, an increase in rate hikes will bring higher mortgage interest rates as they typically follow the general path of Treasury Yields.
The latest Mortgage Monitor report from Black Knight shows that a combination of rising mortgage rates and home prices already caused housing affordability to drop to its lowest point since 2009.
And rising mortgage rates are already a major concern among homebuyers, according to a new study from realtor.com. Mortgage rates have reached their highest level since December 2016, a fact that 34% of home buyers find concerning or very concerning.
While no official documents have been signed to enact the new tariff, Trump continues to voice his commitment to the tariff, despite the threat of a trade war.
We are on the losing side of almost all trade deals. Our friends and enemies have taken advantage of the U.S. for many years. Our Steel and Aluminum industries are dead. Sorry, it’s time for a change! MAKE AMERICA GREAT AGAIN!
— Donald J. Trump (@realDonaldTrump) March 5, 2018
