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The US-China trade war is affecting $10 billion worth of goods used in the homebuilding industry - and the US just saw the biggest decline in supply of new homes in 6 years

Business Insider | Aug 20, 2019, 08.44PM IST

incomplete construction suburbs

The United States' trade war with China hasn't left the housing industry untouched.

In May, tariffs on $200 billion worth of Chinese goods were increased from 10% to 25%.

According to the National Association of Home Builders (NAHB), of that $200 billion worth of Chinese goods, $10 billion are used by the home-building industry. Other industries at risk of being negatively impacted by the tariffs include the automobile industry, the tech industry, and the agricultural industry.

The increased tariffs represent a $2.5 billion tax increase on residential construction, the NAHB reports.

Read more: 'The longer the trade war goes on, the weaker China gets': Trump doubles down on tariff threats despite recession concerns

"With America facing a housing affordability crisis, it is counterproductive to enact policies that will needlessly drive up the cost of housing. We respectfully urge the administration to change course and work to resolve these trade disputes in a manner that won't harm American businesses and consumers," Randy Noel, Chairman of NAHB, said in a September 2018 statement in response to increased tariffs.

A recent Redfin study revealed that in the US, the supply of new homes was down 1% in the second quarter of 2019, marking the biggest annual decline since the first quarter of 2013.

"With the affordability crisis that's happening right now, I think the root cause is really a lack of supply," Daryl Fairweather, Redfin's chief economist, told Business Insider.

After the housing crash in the early 2000s, home builders weren't reaching the same productivity levels they were before, Fairweather explained. As a result, there are fewer homes for people to own and that, simply, limits homeownership.

"The tariff war is certainly not helping in that regard," Fairweather added.

And it doesn't seem like the heavy burden of the trade war on the housing industry will lighten up anytime soon. Business Insider's Gina Heeb previously reported that even with a recession looming, President Donald Trump "appeared increasingly comfortable with prolonged trade tensions."

Trump remains adamant that as the trade war drags on, the US will get stronger and China will get weaker.

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