Real estate professionals active in the L.A. market are bracing themselves for another wave of tariff-induced uncertainty following the U.S. Supreme Court\u2019s ruling, which deemed the tariffs enacted under the International Emergency Economic Powers Act as illegal.<\/p>\n
Despite the Feb. 20 ruling, President Donald Trump has been adamant that he will find other avenues to impose his tariffs, while also vowing in a Truth Social post to raise them higher.\u00a0<\/p>\n
Trump\u2019s tariff policies have already caused upheaval for local businesses, and now the country\u2019s heightened situationship with tariffs will further disrupt L.A.\u2019s real estate market, according to experts across development, manufacturing and finance.<\/p>\n
\u201cThis is a very shifting landscape for (many) American companies,\u201d said Ken Calligar, chief executive and founder of manufacturing firm RSG 3\u2022D.\u00a0\u201cAnd that creates a huge amount of uncertainty which creates a disincentive to invest and grow your business.\u201d <\/p>\n
RSG 3\u2022D manufactures structural concrete insulated panel building systems aimed at protecting structures from natural disaster events. The firm is headquartered in New York City but has an international presence having worked in 20 countries in its tenure. Following the 2017 Tubbs Fire in Northern California, RSG 3\u2022D has been increasingly focused on the West Coast, Calligar said. Over the last year, that focus has narrowed in on Los Angeles given the rebuilding needs created by last year\u2019s wildfires.\u00a0<\/p>\n
With its primary manufacturing plant located in Mexico, RSG 3\u2022D has felt the weight of tariffs on products such as steel.<\/p>\n
\u201cWe are 8 miles across the U.S. Southern California border and have been manufacturing there consistently since 1992,\u201d Calligar said. \u201cIn the last year, those 8 miles have become very, very expensive.\u201d<\/p>\n
Firms\u2019 abilities to embark on new developments may also take a hit given uncertainty around materials pricing as well as macro-economic factors, said Garret Weyand, partner at Cedar Street Partners, a La Ca\u00f1ada Flintridge-based development firm.<\/p>\n
\u201cIf costs are too high because of these tariffs, then projects don\u2019t get built,\u201d Weyand said.<\/p>\n
With the future of pricing up in the air for construction projects, Weyand said banks considering providing two-year construction loans will likely make borrowers increase the amount of equity they put into a deal so that the bank is covered in the event tariffs and inflation raise project costs over the course of the development.<\/p>\n
\u201cIt really falls back to that end user or that builder at the end of the day to shoulder those costs if they can\u2019t raise their prices to (mitigate) that,\u201d he said.<\/p>\n
For RSG 3\u2022D, Calligar said the firm is absorbing the burden of the tariffs themselves rather than raising prices on consumers. While he was candid that the impact of taking on this financial burden \u201cmakes us a less profitable company,\u201d Calligar hopes this administration\u2019s tariff policies are temporary and things will \u201cbecome more rational in the future.\u201d<\/p>\n
\u201cFor whatever reason it\u2019s been deemed to be in the national interest that a company like ours is penalized while trying to provide sustainable, resilient housing and infrastructure to homeowners in California and throughout the United States,\u201d Calligar said. \u201cIt\u2019s unfortunate in our view and \u2026 it\u2019s counterproductive.\u201d<\/p>\n
Along with material costs, Weyand also pointed to the relationship between the tariffs, interest rates and inflation.<\/p>\n
\u201cWith tariffs basically causing inflation\u2026 that gives the central bank a cause to leave interest rates the same,\u201d Weyand said, noting that the lowering of interest rates and the opening of banks are \u201cthe biggest things for builders, (which) can be directly related to tariffs.<\/p>\n
\u201cThis Fed is more concerned with inflation than they are interest rates, so as a way to keep inflation down, they (will likely) need to keep interest rates high,\u201d he added.<\/p>\n
Both Weyand and Calligar emphasized the unfortunate timing of the tariffs as the steel industry had just been on the brink of recovery following volatility during and after the Covid-19 pandemic.<\/p>\n
\u201cIn terms of these tariffs, it\u2019s ironic that President Trump campaigned on and seems committed to reducing regulatory burdens, yet this is the biggest burden across the board on many of these companies by far,\u201d Calligar said. \u201c\u2026 Everybody suffers.\u201d<\/p>\n
Along with the poor timing with regard to the steel industry\u2019s recovery, tariffs also complicate\u00a0 rebuilding following last year\u2019s wildfires.<\/p>\n
Tariffs aside, given the massive need to rebuild versus the availability of labor, Jeff Fishman, founder of Carthay-based JSF Financial, said that alone will cause higher pricing for those rebuilding. Then, when you throw tariffs into the equation, the overall construction costs surge even higher.\u00a0<\/p>\n
Additionally, the constant bait and switch of tariffs \u2013 both in terms of the legality and the exact percentages \u2013 makes planning arduous.<\/p>\n
\u201cThe difficulty in estimating construction prices has made some people\u2019s decision-making process even more challenging than anticipated,\u201d Fishman said. \u201c\u2026Planning from a capital and budgetary perspective can be very frustrating and likely require a far greater buffer than typically needed historically.\u201d<\/p>\n
Fishman also noted that suppliers usually can\u2019t hold prices or guarantee product availability for longer than a week.<\/p>\n
The struggles faced by those looking to rebuild is part of the reason RSG 3\u2022D is swallowing tariff costs. Currently, the firm has secured about a dozen rebuild permits in L.A. with 80 additional projects going through the approval process.<\/p>\n
\u201cOur clients are struggling in an always challenging economy,\u201d Calligar said. \u201c\u2026 I have yet to meet a client who feels that they are not under extreme budget pressure for their house and their rebuild and so, it\u2019s the wrong time to pile on.\u201d<\/p>\n
Officials at import gateways such as the Port of Long Beach held an optimistic if tempered reaction to the Supreme Court\u2019s decision.<\/p>\n
\u201cThe Port of Long Beach customers and logistics partners depend on clear, predictable trade policy to plan investments, move cargo efficiently and keep goods flowing to American businesses and consumers. An orderly approach to tariffs helps businesses plan, and ports like Long Beach maximize their contribution to the U.S. economy,\u201d Noel Hacegaba, the port\u2019s chief executive, said in a statement. \u201cAs one of the nation\u2019s largest gateways, the Port of Long Beach will continue working closely with our partners to enhance the efficiency, reliability and velocity of cargo movement. Doing so supports the broader supply chain, strengthens U.S. competitiveness, and sustains the 2.7 million jobs tied to the Port of Long Beach.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Real estate professionals active in the L.A. market are bracing themselves for another wave of tariff-induced uncertainty following…\n","protected":false},"author":2,"featured_media":200465,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27],"tags":[48,52,51,47,50,49,93133],"class_list":{"0":"post-200464","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-los-angeles","8":"tag-la","9":"tag-la-headlines","10":"tag-la-news","11":"tag-los-angeles","12":"tag-los-angeles-headlines","13":"tag-los-angeles-news","14":"tag-rsg-3d"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/200464","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=200464"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/200464\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/200465"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=200464"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=200464"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=200464"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}