Trade War Will Create Further Economic and Financial Market Stress
The National Association of Home Builders (NAHB) reports that the ongoing global trade war is exerting significant pressure on the U.S. economy and financial markets. The U.S. has implemented a 10% baseline tariff on nearly all trading partners, with higher “reciprocal” tariffs targeting countries with substantial trade deficits. Although a 90-day pause was announced for these reciprocal tariffs, China remains excluded and is now subject to a 145% tariff, effectively disrupting supply chains and increasing prices for Chinese goods. This has led to a spike in the 10-year Treasury rate to 4.5%, indicating heightened investor concern and market volatility.
The NAHB has revised its 2025 GDP growth forecast down to approximately 1%, citing the trade war’s impact on economic activity. Inflation is expected to rise above a 3% annual rate, and unemployment may approach 5% as growth slows. While certain sectors, such as U.S. energy exports, might find new opportunities, the overall economic outlook remains cautious. The housing industry, in particular, faces challenges due to increased tariffs on materials like Canadian lumber, which are set to rise from 14.5% to 34.5%, potentially leading to higher construction costs and affecting housing affordability.