A new round of tariffs announced by former President Donald Trump has set off alarm bells among economists and housing market analysts, who warn that the economic ripple effects could push mortgage rates higher.
This could make homebuying more difficult for Americans already squeezed by inflation and limited inventory.
Why It Matters
Mortgage rates have become one of the key challenges in the U.S. housing market, making it harder for buyers to afford homes while also persuading current homeowners to stay in their current home. Many potential sellers are reluctant to list their homes because doing so would mean taking on a new mortgage at rates much higher than the ones they already have, creating inventory shortages.
“The bond market moves on inflation, economic data and global events like tariffs or political uncertainty,” Nicole Rueth, senior vice president of Movement Mortgage, said in an interview with CNET. “Buyers waiting for 3 percent rates again are wasting time. Those days are gone.”
The intersection of trade policy and the housing market is now front and center for Trump’s presidency, which has made the economy its top focus. Rising home costs are increasingly being felt by Americans as affordability remains a challenge.
U.S. President Donald Trump gestures while speaking during an executive order signing event in the Oval Office of the White House on March 31, 2025 in Washington, DC.
Andrew Harnik/Getty Images
What To Know
Trump’s tariff plan proposes a 10 percent baseline global tariff on imported goods, with higher rates for specific countries—including 35 percent on Chinese imports and 24 percent on goods from Japan.
While touted as a means to protect U.S. manufacturing, the tariffs could lead to “higher prices, slower economic growth, higher unemployment and higher construction costs,” Redfin’s housing economist Chen Zhao wrote in a post on the company’s blog.
Core inflation could climb to 3.5 to 4 percent by year’s end—up from the current 2.8 percent—due to the new tariffs, according to Zhao.
This would likely prevent the Federal Reserve from cutting interest rates aggressively, a move many buyers were hoping would ease the cost of borrowing.
Even if the Fed does proceed with expected rate cuts beginning in June, the downward pressure may not be enough to offset inflationary headwinds.
“Whether rates fall or rise depends on whether this bout of inflation is temporary,” Zhao wrote.
Compounding the challenge to housing affordability is the anticipated rise in construction costs.
Roughly a third of lumber and most drywall and home appliances used in U.S. residential construction are imported, and all are subject to the new tariffs. Higher costs for these goods could be passed on to buyers in the form of more expensive new homes.
Trump campaigned heavily on the economy and improving Americans’ financial lives. However, Americans haven’t felt the positive impact of his presidency, yet, according to polls.
Less than 25 percent of Americans say Trump’s policies are making them financially better off, according to CBS News poll conducted from March 27–28. Nearly twice as many say his policies are making their finances worse.
The poll also found most Americans oppose new tariffs and believe they will lead to higher prices, both in the short and long term. Most respondents also say Trump is focusing too much on tariffs and not enough on lowering prices.
What People Are Saying
Melissa Cohn, regional vice president of William Raveis Mortgage, told Newsweek: “Mortgage rates are going down at the moment. However, when the higher costs of goods start to push up the rate of inflation, it is quite possible that rates will go back up. I expect to be on a mortgage rate roller coaster for the next few months.”
Title and escrow expert Alan Chang told Newsweek: “Much of the population has come to the realization that the current rates are the new normal and the 2-3 percent range will likely never return. Because of this, housing has just started to normalize. Sellers are realizing that they will likely not see double digit percentage gains within a year or 2 and buyers are starting to see values level off a bit in many markets.”
Danielle Hale, chief economist at Realtor.com, told Newsweek: “I don’t think that the inflationary impact from tariffs will be the bigger factor for interest rates. In fact, early reaction from the markets suggests that investors are far more concerned with the economic growth implications of this trade policy, and we’re seeing financial markets move lower and bond prices move higher, which means lower interest rates.”
Kevin Thompson, the CEO of 9i Capital and the host of the 9innings podcast, told Newsweek: “Mortgage rates have slowed the housing market to a crawl. It’s not just the rates; it’s the combination of high home values and high interest rates. If home prices were lower, maybe buyers could handle the higher rates. But when both are elevated, it’s a recipe for disaster. Trump’s tariffs only add fuel to the fire.”
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: “Further inflation to both housing costs and other commonly purchased items could cause the Fed to reverse course on dropping interest rates and play a key role in increasing – not decreasing – mortgage expenses. As it stands right now, this is a worst-case-scenario for home buyers.”
What’s Next
As uncertainty looms over whether the Federal Reserve will continue with rate cuts despite the expected rise in inflation, the housing market remains in flux.
“It’s still early in the year for the housing market,” Hale said. “The data we’re seeing today will affect the peak spring and summer buying season, but it’s far from determined at this point.”