Home Builder Stocks Fall. Lumber Tariffs Are Back in the Picture.

New tariffs on lumber and other wood products were announced on Monday. (James MacDonald/Bloomberg)

Key Points

• New tariffs impose a 10% duty on softwood timber and lumber imports starting Oct. 14.
• Tariffs on upholstered wooden products and kitchen cabinets will increase to 30% and 50% respectively by Jan. 1.
• An analyst estimates the new tariffs will add $1,000 to home costs, but builders may mitigate the impact.

Home builder stocks were lower on Tuesday after the Trump administration announced new tariffs on imported lumber and other wooden goods. But the additional levy might not be a big hit to home building, one analyst wrote Tuesday.

President Donald Trump announced new Section 232 tariffs on lumber and other wood products on Monday night. Softwood timber and lumber imports will be subject to a 10% duty starting Oct. 14.

The U.S. will also tariff imported upholstered wooden products and kitchen cabinets and vanities at 25%. Starting Jan. 1, tariffs on upholstered wooden products will rise to 30%, and cabinets and vanities to 50%, in absence of deals with exporting countries. There is a 10% limit on wood products from the United Kingdom, and a 15% combined tariff limit on wood imports from the European Union and Japan.

The Commerce Department earlier this year announced an increase in duties on Canadian lumber that brought that total fee to 35% from 14.5%, according to the National Association of Home Builders. The Section 232 tariffs announced yesterday were widely expected this year.

Home builders were down on the news. The iShares U.S. Home Construction exchange-traded fund, which tracks builders and related companies, was 1.3% lower late Tuesday morning, according to Dow Jones Market Data.

Lumber futures were headed in the other direction, rising 2.9% to its highest level since mid-August, according to Dow Jones Market Data.

Builders are perhaps the most visible industry exposed to lumber pricing. But the companies can weather the new tariffs, UBS analyst John Lovallo wrote in a Tuesday note.

The analyst estimates that the new tariffs will add $1,000 to the cost of a home, excluding upholstered wood products, which Lovallo notes are usually not purchased by builders. But that cost “will be spread throughout the entire housing value chain, with the builders perhaps best positioned to push back on suppliers,” he wrote.

Public builders’ scale will allow them to negotiate costs with suppliers, and the U.S. is positioned to ramp up its domestic lumber production, he noted. “In our view, the combination of these factors could help offset some of the pressure from lumber duties,” he wrote.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com