Sacramento’s winners and losers under Donald Trump’s new tariff policies
As California businesses watch the opening moves of the Trump administration’s tariff policies, some are bracing for higher costs.
Home builders — who often use lumber, drywall and appliances from Canada, Mexico and China — say their expenses may rise. Experts say the California agriculture industry here buys key supplies from Canada.
Others expect to benefit: A Sacramento County battery manufacturer expects levies on Chinese goods will help his business.
But economists say that while tariffs can lend protection to certain industries, they can also raise costs for U.S. companies that depend on imported materials, who in turn raise prices for consumers.
“Consumers almost surely lose from tariffs,” said Daniel Sumner, a professor of agricultural economics at UC Davis.
Such concerns could prove largely unwarranted. The U.S. threatened Colombia with tariffs and sanctions, then backed down in late January after the Colombian government agreed to accept flights carrying deported migrants. President Donald Trump had ordered 25% tariffs on imports from Canada on Mexico — then on Monday agreed to a 30-day pause as the countries moved to accommodate his demands around border security and drug trafficking.
But a 10% tariff on Chinese goods took effect Tuesday, and China announced retaliatory tariffs on certain American imports soon after.
Beyond the costs associated with the tariffs themselves, even threats of tariffs, experts say, creates uncertainty for businesses.
Cost, complication for home builders
Three of the main countries targeted for possible tariffs — Canada, Mexico and China — are the largest trade partners for the U.S. homebuilding industry, said Tim Murphy, president and CEO of the Roseville-based North State Building Industry Association.
Canada supplies lumber. Lime and gypsum used in drywall comes from Mexico. China supplies appliances and HVAC systems.
The industry lobbied for exemptions. On Jan. 31, National Association of Home Builders Chairman Carl Harris wrote the White House: Taxing imports would raise the costs of materials, which would in turn raise housing prices. He urged the president to exempt critical construction materials from tariffs.
“We did not see that happen,” Murphy said.
The homebuilding firm Taylor Morrison imports some of its lumber from Canada, and will see higher costs if the U.S. follows through with tariffs on Canadian goods. The Arizona-based company built 660 new homes in the Sacramento area last year, almost 10% of the market.
“Anytime you’re adding cost or complication to what we do… it certainly isn’t helpful to the consumer — or us, in our mission to get as many homes as possible built, and help alleviate the housing crisis that we’re in,” said Aren Bazzocco, Sacramento Division President for Taylor Morrison.
Still, many in the industry believe the new administration will cut back regulations that they view as overly burdensome. Murphy said developer sentiment improved after the election.
“I think the administration will continue to work on the regulatory side, which can provide some cost reductions that could maybe offset some of the increased costs that might come with construction materials in the short term,” Murphy said.
Uncertainty’s influence on business
Pieces of the new administration’s tariff plans have come into focus in recent weeks. Still, in many cases experts say it’s too early to gauge the effects of the imposed or expected tariffs. And uncertainty on its own can sway business decisions.
Intel co-CEO David Zinsner told analysts last week that the company noticed unexpectedly large orders from overseas customers late last year — perhaps a sign, he said, that businesses there were hedging against potential tariffs.
Sanjiv Malhotra, CEO of Sparkz, a battery manufacturing company in Sacramento County, sources most of his materials domestically: the majority of the lithium, iron and phosphate Sparkz uses comes from within the U.S.
He expects to benefit from levies on batteries made in China, and has been a public supporter of the proposed tariffs.
Malhotra acknowledged that the U.S. might see higher prices in the short term. But he believes that over the longer term, tariffs will incentivize companies to bring manufacturing back to the U.S.
“Yes, in the short term until we get our manufacturing up, prices might go up. But in the long term — and I’m not talking decades from now… it is going to be very cost competitive,” Malhotra said.
In the agriculture industry, some are worried about the prospect of tariffs on Canadian canola, an oil seed that dairy farmers buy, said Sumner, the UC Davis economist. The meal is fed to cattle. Others worry about potassium, a key ingredient for fertilizer that is often imported from Canada.
Even though the industry saw some relief early this week when the U.S. agreed to the 30-day pause on proposed tariffs for Canada and Mexico, Sumner said, “it’s still the case that people were scrambling, people were lining up other suppliers.”
“Right now, today, somebody is saying, ‘I’m not going to expand my dairy herd because they may well put on (tariffs),’” Sumner said. “And somebody else maybe right now, today, says ‘I’m going to plant that thousand acres not with pistachios, but table grapes, because I think we’re gonna have these tariffs on Mexico.’”
Those decisions, Sumner said, could yield dividends, or prove costly.
“And that,” Sumner said, “doesn’t count people staying up at night thinking about it.”
