Impact of U.S. Steel and Aluminum Tariffs on Mexico’s Housing Sector

The U.S. has imposed a 25% tariff on steel and aluminum, potentially increasing housing costs in Mexico by 3 to 4%. While investment continues, developers are cautious amid rising material costs. Additionally, a shortage of housing exists, emphasizing the need for government-supported construction initiatives. The steel industry also faces production declines, impacting the overall market.

The Mexican construction sector anticipates a 3 to 4% increase in housing construction costs due to the newly imposed 25% tariffs on steel and aluminum by the United States, as reported by the Mexican Chamber of the Construction Industry (CMIC). These tariffs, which came into effect on March 11, affect key suppliers including Mexico, Canada, and Brazil. Furthermore, U.S. President Trump has hinted at extending tariffs to additional Mexican goods starting April 2, exacerbating potential cost increases.

Carlos Eduardo Ramírez Capó, president of the National Chamber of the Housing Development and Promotion Industry (Canadevi), noted that while investment in housing projects continues unhindered, developers are adopting a more cautious approach. He stated, “The damage will be directly proportional to the duration of the tariffs if it is imposed. If we have an escalation, if we don’t reach an agreement, and they remain in place for six months or a year, there will be an impact.”

Rodrigo Padilla Quiroz, CEO of the Mexican Real Estate Bank (BIM), remarked that no housing projects have been cancelled to date; however, caution remains prevalent among developers. He emphasized that rising material costs are a significant concern, alongside the adverse effects of U.S. trade policies on construction employment, asserting, “The greatest impact [of the tariffs] is on families because it postpones their ability to generate property wealth.”

The housing market in Mexico faces significant challenges, including a shortage of approximately eight million homes. In 2024, only 128,147 homes were constructed, marking the lowest output since the inception of the Single Housing Registry in 2013. Notably, a considerable proportion of these were low-income housing, averaging 521,484 pesos (approximately US $26,000). To combat this housing crisis, President Claudia Sheinbaum announced a plan for the construction of one million new homes, with a total investment of 600 billion pesos (US $29.7 billion) over the upcoming six years.

The steel industry in Mexico produced 18.2 million tonnes in 2024, a decrease from 19.85 million tonnes in 2023, primarily due to lower demand. Of the three million tonnes exported in 2024, 2.3 million tonnes were directed to the United States. Although Mexican steel mills are set to increase production by over five million tonnes annually by the first half of 2026, a decline in foreign demand may yield challenges in the domestic market.

The introduction of tariffs on steel and aluminum by the United States is poised to significantly impact Mexico’s housing construction costs, potentially increasing them by 3 to 4%. While housing investments continue, caution prevails among developers due to rising costs and potential job losses in the sector. The housing shortage remains critical, with governmental efforts aimed at residential construction intended to aid recovery. The steel industry’s production challenges further complicate the situation, warranting close observation of both domestic and international market trends.

Original Source: mexiconewsdaily.com