Court Overturns Trump Tariffs, Sparking Surge in Homebuilder Stocks

Homebuilder stocks rallied Thursday, in a sign that residential construction will benefit from the sweeping court ruling striking down President Donald Trump’s tariffs on imported good.

Shares of D.R. Horton and Lennar, the two largest U.S. homebuilders, rose about 0.7% in early trading, alongside a similar bump for other public companies in the sector. The benchmark S&P 500 gained 0.87% at the opening bell.

In a surprise ruling late Wednesday, the little-known U.S. Court of International Trade shot down Trump’s sweeping Liberation Day reciprocal tariffs on nearly all trading partners, as well as his 20% anti-fentanyl levies on China, Canada, and Mexico.

The Trump administration plans to appeal the ruling, and Trump is expected to seek other legal authority to reimpose the steep tariffs that have become a centerpiece of his economic agenda.

On Thursday afternoon, an appeals court ruled that Trump’s tariff’s could remain in place as the administration’s appeal plays out.

“Whether or not the tariffs are re-imposed in some form, I think the rally in residential construction stock speaks directly to the likely impact on the price of materials,” says The Budgets Senior Economist Sara William.

“When construction becomes less expensive, those savings can be passed on to homebuyers—and builders are more likely to move forward with new projects,” he adds. “That means more homes get built, which helps ease the housing shortage and improve affordability at the margin.”

The ruling was met with cautious relief from homebuilders, who had warned that the tariffs would drive up the cost of imported construction materials and make planning new developments more difficult.

“The situation on the tariff front remains fluid, and the trade court decision illustrates the need for the Trump administration to seek fair, equitable deals with America’s trading partners that roll back tariffs on building materials,” the National Association of Homebuilders wrote in an analysis of the new ruling.

Notably, the court ruling does not impact tariffs on Canadian lumber, which are currently at 14.5% and set to more than double later this year.

Canadian lumber, which accounts for about 70% of the imported lumber used in home construction, is subject to tariffs under different authority than the reciprocal tariffs impacted by the court ruling.

Earlier this month, homebuilders said in a key survey that Trump’s whirlwind trade policies have made planning challenging, with 78% reporting difficulties pricing their homes recently due to uncertainty around material prices.

Overall builder confidence in the market for newly built single-family homes dropped to a two-year low in May, according to the National Association of Home Builders/Wells Fargo Housing Market Index.

Construction activity on single-family homes has suffered since Trump began implementing his tariff scheme, with single-family starts dropping in April to an eight-month low.

That downturn came as unwelcome news for a housing market that is grappling with a housing shortage of nearly 4 million units, according to a recent analysis from the Realtor.com economic research team.