The New Tariffs and the Construction Industry

I’ve had lots of conversations with contractors over the past few months, and everyone is trying to figure out how they should approach the recently proposed tariffs. I’ve found that when things are uncertain, it helps us to stick to what we know and focus on what’s in our control.

With that in mind, I’ve compiled and examined insights from across the construction industry to help ease any uncertainty about the current economic landscape surrounding tariffs.

What We Know and What We Can Take Away

According to the White House, the tariffs were imposed to boost U.S. manufacturing and protect American jobs while also growing the economy and increasing tax revenue. There have been some stop-and-go circumstances at play, but there are still a few notable facts:

• Feb. 1^st: President Trump proposed 25% tariffs on all goods from Canada and Mexico and 10% tariffs on all goods imported from China.
• Feb. 3^rd: Tariffs on goods from Canada and Mexico were paused for 30 days, citing a commitment from both countries to dedicate more resources to border security to combat drug trafficking.
• Feb. 4^th: The 10% tariff on all Chinese imports took effect.
• Feb. 11^th: A 25% tariff on all imported steel and aluminum is issued, including derivatives like steel nails, columns beams, tubes, pipes, doors and more “without exceptions or exemptions” from previous trade deals. President Trump cited unfair trade practices and national security concerns as the driving forces. The tariffs are set to take effect on March 12^th.

As a whole, keeping in mind everything is still new, economists are nervous. Specifically, in my research, the main concern revolves around the steel and aluminum tariffs. That’s not to say there won’t be disruptions caused by the 10% tariffs on Chinese imports, but many feel the steel and aluminum tariffs will have a more widespread impact on material and equipment costs and availability.

According to CBS News, the steel and aluminum tariffs will impact a total of $50 billion in imports and will likely cause downstream disruptions. Let’s take a closer look at the numbers.

In 2023 the U.S. produced 74% of its steel domestically and imported 26%, according to the Council on Foreign Relations. Additionally, the U.S. relied on imports for about 40% of its rolled steel, which is used in manufacturing construction equipment and structural materials like columns and beams. The U.S. produced 56% of aluminum domestically and imported 44%. Aluminum material is frequently used for roofing, windows and doors.

Ultimately, these numbers indicate that tariffs may cause disruptions — at least for a short time.

We may see further investment in domestic manufacturing of steel and aluminum to meet demand, but that can’t happen overnight.

In the short term, experts are expecting aluminum and steel costs to rise. However, in the long term, the thought is that this could mean more domestic steel and aluminum production, cheaper shipping costs and shorter turnaround time for the materials you need.

The Construction Industry’s Reaction

The tariffs have led to uncertainty across the industry, with experts and trade organizations, like Associated General Contractors of America, citing project delays, cost increases and the stockpiling of materials as major concerns.

“Import taxes allow domestic producers to raise their prices, and the new 25% levies on steel and aluminum will result in just that if they remain in place,” said Anirban Basu, Associated Builders and Contractors Chief Economist. “A strong majority of contractors expect their sales to increase over the next six months, according to ABC’s Construction Confidence Index, and the combination of increased demand for construction inputs and ongoing supply chain confusion suggests input price escalation could accelerate through the first half of 2025.”

Basically, U.S. steel and aluminum manufacturers are expected to raise prices as they face growing demand from consumers who previously relied on imports.

Experts are also predicting that costs for materials, resources and services may continue to rise through the first six months of the year as markets and supply changes adapt in the face of increasing domestic demand.

It’s important to note that the construction input prices — which measure the costs of materials, services and resources across the industry — rose by 1.4% in January. Dr. Basu and others believe the anticipation for these tariffs led many contractors to stockpile materials ahead of time, leading to January’s spike.

Interpretations and Planning Your Next Moves

The truth is: it’s too early to make a call. These tariffs were introduced recently — some are being paused, and others are in full effect. Could there be big hikes in costs? Maybe. There could also be a leveling out around Q3. We can’t say for sure.

That doesn’t mean you can’t prepare. There are some action items you can do right now to stabilize your company:

1. Build contingencies into your budgets to offset cost increases related to tariffs.
2. Review your material inventory and assess your equipment needs to determine if you need to increase certain resources to avoid unnecessary costs and delays.
3. Research other material suppliers to help minimize the impact of material shortages on your business.
4. Invest in technology to precisely track cash flow and compare trade-specific suppliers to get materials when you need them at the best available price. These technologies also drive efficiency, which will be essential if you’re trying to reduce overspending and waste.
5. Take advantage of resources like AGC’s Tariff Resource Center for Contractors, review articles from trade organizations and register for webinars. These resources will keep you aware of changes to tariffs and industry trends.
   1. Webinars, in particular, give you invaluable information and Q/A time with industry experts.

I understand the current economic environment can feel a bit intimidating. The geopolitical factors that led to these decisions are complex, meaning that tariffs could be in place for a while. But that doesn’t mean you should shy away from taking on new projects. I believe as long as you remain vigilant by regularly reviewing news and insights from industry experts, you can make proactive, informed decisions that put your business in a place to succeed.