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Here's Why Homebuilder Stocks (KBH, DHI, LEN, PHM) are Falling Today

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On Tuesday, shares of prominent homebuilder stocks are sliding after the Trump administration announced a new tariff on Canadian soft wood lumber imports.

Homebuilder companies like KB Home (KBH - Free Report) , D.R. Horton (DHI - Free Report) , Lennar (LEN - Free Report) , PulteGroup (PHM - Free Report) , NVR (NVR - Free Report) , Toll Brothers (TOL - Free Report) , and the iShares U.S. Home Construction ETF (ITB - Free Report) are all falling, down about 2.15%, 2.38%, 4.42%, 1.66%, 1.45%, and 0.87%, respectively, in midday trading. But it doesn’t stop there. Shares of Washington-based lumber company Weyerhaeuser (WY - Free Report) are down about 2%, while even timber REITS Rayonier (RYN - Free Report) and Potlach (PCH - Free Report) have taken a hit as well.

The U.S. Commerce Department’s International Trade Administration (ITA) will impose import taxes that range from 3.02% to 24.12% on Canadian companies Canfor Corporation, J.D. Irving, Resolute FP Canada, Toko Marketing and Sales Ltd. and Tolko Industries, and West Frasier Mills. This action is meant to level the playing field between domestic producers and government-subsidized foreign producers.

The department also established a preliminary subsidiary rate of about 20% for all other producers and exporters in Canada.

Canada has already begun to push back against the White House’s measures. "The government of Canada will vigorously defend the interests of the Canadian softwood lumber industry, including through litigation," said Natural Minister Reroused Jim Carr and Foreign Affairs Minister Chrystia Freelandin a statement.

Trade disputes over soft lumber has long been an issue between the U.S. and Canada, with the U.S. claiming that Canada unfairly and illegally subsidizes its lumber industry by charging low fees to log public lands.

The tariff also comes at a difficult time for U.S.-Canada relations in general. North American Free Trade Agreement (NAFTA) discussions are looming, and President Trump recently targeted Canada’s dairy sector, calling it “unfair” in a speech in Wisconsin. The president also criticized the industry in a tweet this morning, saying “Canada has made business for our dairy farmers in Wisconsin and other border states very difficult. We will not stand for this. Watch!”

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