After the Supreme Court Ruling — A 15% Global Tariff?

The Real Impact of Tariffs on the Chicago Real Estate Market

Following a recent U.S. Supreme Court ruling, the administration is pushing to temporarily implement a global tariff of up to 10–15% under Section 122 of the Trade Act. This has sent markets into significant turbulence.

The measure is designed as an emergency replacement for the existing country-specific tariff framework under IEEPA (International Emergency Economic Powers Act), and can be applied for up to 150 days — roughly five months. Some are speculating the rate could be pushed as high as 15%, though nothing is finalized yet. That uncertainty alone is enough to rattle markets.

So why is even 10% such a big deal?

On its surface, 10% might not sound alarming. Before the second Trump administration in 2024, the U.S. average tariff rate was approximately 2.4–2.5%, and by World Bank measures, closer to 1.5%. However, with recent tariff policy escalations, the average rate has surpassed 7%, and some analyses suggest it has climbed as high as 13–16%.

In other words, we've gone from roughly 2% to over 10% — nearly a fivefold increase. The market's sensitivity isn't just about the number itself. It's about the speed of the increase and the policy unpredictability surrounding it.

How Tariffs Directly Impact the Real Estate Market

1. Construction Material Costs

The first place tariffs hit is building materials. Lumber, steel, and aluminum are essential to new home construction. With steel already subject to a 25% tariff and aluminum at 10% under Section 232, adding a global 10–15% tariff on top creates compounding cost pressure.

For builders, higher input costs mean one of two outcomes: higher sale prices or reduced supply. According to the National Association of Home Builders (NAHB), tariffs could add thousands of dollars to the cost of building a single new home. Some estimates suggest an additional burden of over $700 per year for certain households.

2. Reduced New Supply

The Chicago and Illinois markets are already tight on inventory. Supply of single-family homes and new townhomes in the suburbs is particularly limited. When construction costs rise, developers delay groundbreakings or scale back projects. Less supply means existing home prices find stronger support.

Tariffs don't automatically lead to falling home prices. In fact, by constraining new supply, they can actually act as a floor that protects existing home values.

3. Mortgage Rate Volatility and Buyer Psychology

Tariffs stoke inflationary pressure. When inflation heats up, bond markets grow unstable, and that instability flows directly into mortgage rate volatility. What's making the market especially reactive right now isn't the rate level itself — it's the unpredictability. Buyers hesitate. Sellers hold back. Transaction volume drops, and the market temporarily slows.

What Happens If Tariffs Are Rolled Back?

If tariffs ease, material costs stabilize and builders are more likely to break ground on new projects. Increased supply could take some pressure off prices. The complicating factor is that the current policy is a temporary 150-day measure. What happens after that is heavily dependent on political variables — which means uncertainty isn't going away anytime soon.

In this kind of environment, waiting is not always the winning strategy.

How Should You Respond in the Chicago Market Right Now?

If you're a seller with an existing home, a supply-constrained market can work in your favor. Pricing power tends to hold when inventory is limited. Timing and strategy matter more than ever.

If you're a buyer, approach the market with refinancing options in mind, even if current rate volatility feels uncomfortable. If construction costs stay elevated long-term, new home prices are likely to climb further. Existing homes may actually become the better value.

Markets tend to overreact to policy headlines and then gradually adjust to real pricing. Uncertainty is high right now, but that's precisely when a strategic approach matters most.

The Bottom Line

Tariffs are not just a trade issue. They flow directly into construction costs through lumber and steel prices. Construction costs shape housing supply. And supply ultimately determines both prices and transaction volume.

This is not a market where waiting wins. It's a market where the advantage goes to those who understand the information quickly and act with intention.

Does the market feel complicated right now? Don't let the headlines drive your decisions. What matters is a strategy built around your local market conditions.

For a consultation tailored to the Chicago and suburban markets, reach out anytime.

Chicago BDB — Sang-chul Han 773-717-2227 | ChicagoBDB@gmail.com