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The Effect of Trump’s Tariffs On Construction

Friday, May 25, 2018

President Donald Trump’s decision to enforce a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports has rattled financial markets and sparked concerns about global trade. The construction industry is bracing for the effects of the tariffs, as it relies heavily on steel and aluminum for its projects. 

Analysts predict that U.S. steel makers will have increased pricing power as imports become more expensive. Since most aluminum is imported, costs are likely to rise. Although U.S. steel workers have praised the tariffs, the construction industry’s labor force could take a big hit. As many as 28,000 construction jobs could be lost, according to a recent study by The Trade Partnership.

For manufacturers of heavy equipment such as Caterpillar Inc. and Deere & Co., JP Morgan analysts predict that the tariffs could dent their fiscal 2019 earnings by 6 percent and 9 percent respectively. Steel is the largest raw materials cost for both companies.

The National Association of Home Builders has spoken out against the tariffs as it’s still recovering from the Canadian lumber tariffs of 2017. It claims that higher steel costs would raise construction costs, which could eventually be passed on to homebuyers.

Although Mexico and Canada are temporarily exempt from the tariffs, their continued exemption depends on negotiations to modernize the North American Free Trade Agreement. Canada is the largest exporter of steel and aluminum to the United States, accounting for 16 percent of imported steel and 41 percent of imported aluminum.


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