J.D. Vance Actually Does Understand How Costs Get Passed Along the Supply Chain
Vance says higher energy prices make building houses more costly. What, then, do tariffs on steel and lumber do?
During an otherwise sterling performance in Tuesday night's debate, Sen. J.D. Vance (R–Ohio) made one telling misstep: He admitted that he actually does understand how costs along a supply chain are passed on to consumers.
In response to a question about how to expand the housing supply, Vance argued that part of the solution must be lower energy costs—because those factor into the cost of housing.
"Think about it, if a truck driver is paying 40 percent more for diesel, then the lumber he's delivering to the job site to build the house is also going to become a lot more expensive," Vance said. "If we open up American energy, you will get immediate pricing release relief for American citizens, not by the way, just in housing, but in a whole host of other economic goods too."
That's a good point—and Vance is right that affordable, abundant energy should be a top priority for any presidential administration.
But he should also consider the lumber that's being carried on the truck in his hypothetical example.
If that lumber comes from Canada, it will be subject to 14.5 percent tariffs—tariffs that were hiked from 8 percent to that level earlier this year—that will increase the cost of that load a lot more than slightly higher fuel prices will. The National Association of Home Builders, an industry group, calls those tariffs "a tax on American builders, home buyers, and consumers" and says they directly affect housing affordability.
Building housing also requires steel and aluminum, and lots of other products manufactured from those two materials. Vance's running mate, former President Donald Trump, slapped tariffs on much of America's supply of steel and aluminum (and, in fairness, the Biden administration has kept those tariffs in place). Trump and Vance are campaigning on a plan to hike more tariffs, which would not only increase the cost of buying a house but also filling it with furniture, appliances, and other items.
The results of those policies will be exactly the same as what Vance described in his answer: If tariffs add 14 percent to the price of lumber or 25 percent to the price of steel being delivered to a job site, then the resulting house will be more expensive.
It would have been nice to see the moderators in Tuesday's debate or Vance's opponent, Minnesota Gov. Tim Walz, seize that opportunity to ask Vance whether the tariffs he supports would have the same effect of inflating the price of housing. Unfortunately, neither did—indeed, Walz struggled throughout the debate to land a blow against Vance, with the lone exception being a discussion about the 2020 election.
Separately, Vance praised the Biden administration for continuing many of Trump's tariffs, which he called "the most pro-worker part of the Biden administration." Without tariffs, Vance said, China and other countries would "undercut the wages of American workers unless our country stands up for itself and says you're not accessing our markets, unless you're paying middle class Americans a fair wage."
The contrast is striking: Vance is saying that tariffs are good because they drive up the wages that American workers earn, but he's also eager to reduce the prices of the things, like houses, that those workers build. This is nonsense: You cannot artificially increase the price of inputs—whether labor or raw materials—and simultaneously expect the price of the final product to fall.
As with so much of Vance's candidacy, the really frustrating thing here is that he obviously knows better—he's an Ivy League grad and once had a reputation as a policy wonk. And for just a brief moment on Tuesday night, he let the populist mask of economic illiteracy slip.
