Market Turbulence and the Tariff Rollercoaster
Last week's market activity whipsawed like a financial roller coaster, driven primarily by President Trump's initial tariff announcement. The move triggered investor panic, with immediate flight to safer assets as people sold stocks and purchased bonds.
This initially pushed mortgage rates down as Treasury yields fell—potentially aligning with speculation that one of Trump's goals was to lower 10-year Treasury rates, allowing the U.S. to refinance its $5 trillion in maturing debt at lower rates, and potentially saving taxpayers up to $1 trillion over the next decade.
However, the market whiplash came quickly. China hit back—imposing countermeasures and offloading $50 billion in U.S. bonds. That overwhelmed demand and drove yields (and mortgage rates) back up.
The S&P 500 nosedived nearly 19%, flirting with bear market territory as tensions between the world’s two largest economies turned into a high-stakes standoff.
The Tariff Pause and Immediate Market Relief
Then came the pivot. Yesterday, Trump announced a 90-day pause and a substantial scale-down of his tariff plan.
"I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately," Trump posted on Truth Social, while simultaneously raising tariffs on China to 125%.
Markets exhaled. The S&P had its best day since 2008 and its third-best day since WWII (+9.5%), and the Nasdaq had its best day since 2001 and its second-best day ever (+12.2%). Homebuilder shares surged as recession fears receded and the prospect of significantly higher imported materials costs temporarily subsided.
"Because tariffs will undermine economic growth, a pause on the worst of the announcement is certainly a welcome update," noted Realtor.com Chief Economist Danielle Hale, while cautioning that "given how many changes we've seen in the last week, uncertainty remains high."
Housing Market Implications - Mixed Signals
A sustained drop in mortgage rates could give homebuyers some breathing room - especially as we head into peak homebuying season.
But headwinds remain. The 10% baseline tariff stays in effect, and sector-specific tariffs continue unaltered. Most notably, tariffs on Canadian lumber—critical for home construction—are still set to rise to 34.5% this year, more than doubling the current rate. With the U.S. currently falling short of domestic timber demand by approximately 30%, these lumber tariffs will continue to pressure construction costs.
More problematic for homebuilders: the 125% tariff on Chinese goods directly impacts 27% of imports used in home construction. China is a major supplier of appliances, fixtures, and glass—core components of the average home. According to a John Burns Real Estate Consulting estimate, even with the pause, tariffs could add $12,800 to the cost of building a home.
And if mortgage rates keep moving like meme coins? Financial planning becomes guesswork for both developers and buyers.
Impacts on The Travel Industry
While tariffs don't directly target the travel sector, their economic ripple effects create significant challenges for the U.S. travel industry, particularly for vacation rental operators.
Tourism Economics has dramatically slashed its 2025 forecast, now projecting a 9.4% drop in international arrivals—nearly double the 5% decline predicted before the tariffs. This completely reverses earlier predictions of 9% growth in international tourism.
STR hosts face multiple operational challenges from the tariffs. The 10% import tax hits furnishings, appliances, and tech—smart locks, thermostats, security cams. And supply chain delays mean waiting weeks for replacements. If a fridge or A/C unit fails, it could lead to canceled bookings and lost revenue.
The Broader Economic Picture and Future Outlook
Goldman Sachs projects inflation could end the year about 0.5% higher due to these tariffs. If inflation rises, the Federal Reserve may maintain higher interest rates to control price growth, affecting travel through more expensive financing, a stronger dollar deterring foreign visitors, and slowed economic growth hurting business travel.
Some factors may counterbalance these pressures. Extended Trump-era tax cuts could boost productivity, deregulation may lower business costs, and businesses will likely absorb some tariff costs through lower profit margins. Additionally, currency fluctuations may partially offset import price increases, and many businesses prepared by diversifying supply chains before tariffs took effect.
Domestically, inflation could dampen travel spend—but STRs have proven resilient in downturns. "Staycations" often surge as families trade big-ticket resorts for local getaways. Rentals with kitchens, flexible check-in, and lower per-night costs offer tangible value when budgets tighten.
Navigating the New Economic Landscape
Housing, tariffs, and travel are now deeply entangled. The 90-day pause is a relief—but it’s just that: a pause. The deeper structural forces are still very much in motion.
For housing purchases, this means timing matters more than ever. Locking in financing will require precision and back-up plans. For STR operators, tighter margins and supply issues demand tighter ops and smarter inventory planning.
As Warren Buffett says, "Be fearful when others are greedy, and greedy when others are fearful." In a moment like this—the advantage goes to those who stay nimble, keep a close eye on the indicators, and adapt faster than the market.
