As Maine builders try to pick up the pace of production to meet the state’s ambitious housing goals, experts say a series of tariffs threatens to undermine efforts by raising already high prices and slowing down production at the same time it needs to be ramping up.

President Donald Trump’s proposed 25% tariff on all goods coming from Canada — Maine’s largest trading partner and a major supplier of building materials — has been paused for 30 days, while a 25% tariff on all imported steel and aluminum is already in place.

Material costs have increased more than 20% since 2020. Rising interest rates have made projects harder to finance. Construction companies can’t find enough workers. There’s more demand than they can keep up with. Large projects are frequently met with pushback from the community.

Adding a tariff on top of everything else, could be “the straw that breaks the camel’s back,” said Elliott Chamberlain, owner of Chamberlain Homes in Saco.

“We’re not talking about tariffs with a 3% interest rate or more labor than we know what to do with, or more supply than we know what to do with,” he said. “It exacerbates what is almost an unmanageable problem.”

INCREASED COSTS

Travis Blake, president of the Maine Association of Home Builders and Remodelers, estimated that the Canadian tariffs alone could raise home prices between 5% and 10%.

That may not seem like a lot, but home prices have gone up almost 75% in the last five years. Another 5% could push some people over the edge.

“Added to what is already expensive … that’s going to disqualify a lot of people from buying a house today,” he said.

Lumber costs account for about 10% of a home’s cost.

Maine imports about $200 million worth of lumber from Canada each year, Blake said. A 25% tariff would increase that bill by more than $50 million. 

Nationally, in 2023, the U.S. imported $5.8 billion worth of sawmill and wood products from Canada.

Part of the reason Maine imports so much lumber from Canada, Blake said, is that Canada subsidizes its timber-harvest industry, meaning it carries a lower price tag.

Because of that subsidy, Canadian softwood lumber carries a 14.5% duty rate, meaning that if the tariffs go through, the overall effective Canadian lumber tariffs will rise to nearly 40%.

“Part of this tariff may be able to help some of our Maine mill companies be able to compete,” he said, “but it still drives the cost up.”

But Maine’s mills can’t meet the demand for lumber on their own. Historic overharvesting has resulted in smaller trees than are needed to make the larger boards builders get from Canada, Blake said. 

Maine primarily manufactures boards smaller than 2-inch by 6-inch, and most of the boards in residential construction are at least that wide. 

‘PEOPLE ARE GOING TO PANIC’

But it’s not just the lumber.

Cabinets, roofing, insulation and windows often come from Canada. Commercial or large-scale projects use a lot of steel. Both markets need drywall, which is most often imported from Mexico. The industry imports more kitchen appliances from Mexico than China, Blake said.

The Canadian tariffs may be paused, but Blake anticipates seeing an increase in prices before the 30 days are up.

“People are going to panic a little bit,” he said. “The lumber buyers and the people who source the product for us, they’re going to buy now and create a little bit of increased demand now, which will raise the cost.”

The concern is felt beyond Maine.

The National Association of Home Builders last month told the Trump administration that the tariffs would slow down residential construction, which seemingly contradicts his executive order to increase housing supply and affordability.

“While home building is inherently domestic, builders rely on components produced abroad, with Canada and Mexico representing nearly 25% of building materials imports. Imposing additional tariffs on these imports will lead to higher material costs, which will ultimately be passed on to home buyers in the form of increased housing prices,” Carl Harris, board chair, wrote in a letter to the administration. “We ask that you consider the effects of tariffs on Americans struggling to afford housing and that you exempt critical construction material from such actions.”

THE UNCERTAINTY 

Jonathan Culley, managing partner of Portland development company Redfern Properties, is worried about the disruption from steel and lumber price hikes, but he’s more concerned about an overall rise in inflation.

There are still a lot of unknowns, but Culley is certain the state will see a cooling effect on development.

His current project, a seven-story, 320-unit building on Washington Avenue, “is on the verge of being stuck” if the tariffs move forward.

“It’s both the direct impact of the tariff and the indirect impact of the inflation rate,” he said. If the interest rates are too high, “we can’t justify going forward.”

But right now, everything is still a big “if.”

“The thing about the erratic nature of the Trump economic policy is having everybody stopping and wondering. The fear can be worse than the actual outcome,” Culley said. “As developers, we look for clear guidance and certainty. Right now there’s only uncertainty.”

Elliott believes that uncertainty will trickle down to prospective buyers, further slowing things down.

The more people hear about rising prices or the threat of market instability, the more likely they are to decide to stay put in a house that’s already paid off or that has a 3% interest rate.

“People will start to tighten their purse strings,” he said, “That’s when we really start to see the slow down.”