‘It’s all downside’: Philly’s housing market poised for pain if Trump imposes tariffs on Canada and Mexico, analysts say

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In the coming days, President Donald Trump is expected to impose sweeping tariffs on imports from Canada and Mexico — two countries he claims have “mistreated” the United States for decades.

The controversial decision would have wide-ranging implications, including for big city housing markets like Philadelphia’s, which continue to burden renters and sideline first-time homebuyers amid an ongoing affordability crisis.

Local housing experts say things will only get worse if Trump moves forward with the 25% import taxes, particularly when it comes to affordable housing, which is already in short supply in the city.

“It’s all downside,” said Mark Zandi, chief economist at Moody’s Analytics. “There’s no upside to tariffs.”

Canada and Mexico are the country’s two largest trade partners. And the U.S. imports a number of products from both countries that are used extensively by real estate developers in new construction and renovation projects. The list includes lumber and other wood materials, as well as gypsum, the main component of drywall.

Experts say hiking prices by 25% would undeniably make residential construction more expensive. They say that could cause some developers — already saddled with an ongoing spike in the cost of building materials, higher rates for construction loans and a labor shortage — to halt certain projects while pushing others toward more profitable ones.

“It may be that certain low-end or lower-cost products are no longer viable — there’s no profit to be made on them at these costs,” said Morris Cohen, professor emeritus of manufacturing and logistics at the Wharton School of the University of Pennsylvania.

That means affordable housing could be the “most susceptible to an impact,” added Cohen.

Regardless of the price point, however, rental rates and home prices in Philadelphia are poised to become more expensive as a result of the tariffs. That’s because developers would likely pass along at least some of the added cost of construction to residents — so they can repay any loans and still turn a profit.

Even big development companies would struggle to absorb the additional expense, experts say.

“You’re going to have to increase the rent or government’s going to need to step in and lower property taxes or insurance or something else,” said Ken Weinstein, president of Philly Office Retail.

Large, ground-up construction projects, including apartment towers, would become particularly expensive, in part because they require more building materials to complete than a single home renovation project that blends new and old.

Banks might also require these developers to shell out more money in reserves — dollars designed to ensure a project gets completed — in order to secure a construction loan. Gary Jonas, who leads the HOW Group, said the proposed tariffs could make lenders more risk-averse because they tend to add uncertainty to the market, leading to higher reserves.

“Generally, that number is 8 to 10% that the market has considered reasonable. Now somebody in the market might say, ‘We want that to be more like 20%.’ And that’s a big difference to the economics of the deal. And that will take a lot of things that would have worked and make them not work,” Jonas said.

That uncertainty could also make it more challenging to attract investors for a real estate development, another repercussion that could stall or halt certain projects.

The tariffs on Canada and Mexico are expected to take effect March 4. Trump told reporters last week that the taxes were “moving along very rapidly,” despite efforts by both countries to address illegal immigration and drug trafficking.

And yet it’s possible that Trump will delay implementation again. On Feb. 4, hours before the tariffs were set to take effect, the president hit the pause button after reaching deals with Canada and Mexico.

If implemented, experts say the tariffs could have long-term impacts on the city’s housing market.

In the immediate term, the import taxes could hamper Philadelphia’s ability to grow its supply of housing, a top priority for Mayor Cherelle Parker during her first term.

During a news conference last week, the mayor told reporters that the administration would convene an advisory group to help achieve her goal of creating or preserving 30,000 units of housing.

“That’s not going to happen if our pricing goes up across the board,” said Weinstein. “This is going to be a devastating effect.”