Rising Tariffs Threaten U.S. Construction Industry

Contractors across the U.S. are scrambling to navigate the latest wave of tariffs imposed by President Donald Trump’s administration. The newly enacted 25% tariff on imports from Mexico and most of Canada, coupled with an additional 10% tariff on Chinese goods, is already sending shockwaves through the construction industry.

With another 25% tariff on all steel and aluminum imports in effect on March 12, builders are bracing for further price hikes, project delays and supply chain disruptions.

Uncertainty and Delays

“Tariffs on the import of foreign goods, including from China, Mexico and Canada, could over time make manufacturing in the U.S. more economic sense, relative to importing goods from abroad, which could be good for some industries,” said Ben Johnston, COO of Kapitus, a small business lender.

“But in the short to medium term, these tariffs are likely to drive inflation significantly higher and cause significant disruption to the global supply chain, threatening many U.S. jobs at manufacturers, wholesalers and retailers who rely on the global supply chain to source the components, raw materials and finished products they sell.”

While the industry may have hoped to avoid tariffs, contractors have accepted the reality — so much so that many began stockpiling materials as early as January.

Key materials directly impacted by tariffs, leading to increased costs and potential delays are:

• Lumber: Tariffs on this material, particularly softwood lumber, could significantly increase costs for homebuilders and other projects.

• Steel and Aluminum: Since these are fundamental components of the industry, tariffs on these metals lead to increased prices that have a ripple effect from structural frameworks to roofing and insulation.

• Other Materials: While lumber, steel and aluminum remain the most prominent materials affected, cement and appliances could also see price hikes as well.

What This Means for Consumers 

“Higher tariffs will certainly cause prices to rise for U.S. consumers, as tariffs drive up the cost of the product being imported and these costs must be passed on to the customer,” said Johnston.

“This will not only spur inflation but will lower overall consumption, slowing the economy. However, in the long run, higher tariffs may help protect the viability of certain U.S. manufacturers and could incentivize greater investment in U.S. manufacturing.”

While some sectors may benefit in the long run, the overall impact of tariffs remains uncertain and difficult to predict. Much of that will be determined by President Trump. 

Currently he shows no signs of backing down.

“My guess is the Trump administration is going to put even higher tariffs on Chinese steel,” said Anirban Basu, chief economist at Associated Builders and Contractors.

“If you’re a consumer of steel, that drives up steel prices higher than it would otherwise be.” 

The Road Ahead: What’s Next?

With tariffs now firmly in place and additional measures looming, the construction industry faces an uphill battle. Industry groups are calling for exemptions or policy adjustments to minimize damage, but for now, companies must adapt to the changing trade environment.

Builders are exploring alternative materials, rethinking project timelines and pushing for contract flexibility. Whether these strategies will be enough remains to be seen, but one thing is clear: the construction industry is in for a challenging road ahead.