The Impact of Tariffs on Construction Costs

As everyone knows, there is a lot of controversy regarding trade and tariffs.  It is impacting the stock markets both domestically and internationally, and dramatically.  Recently I have been hearing of subcontractors qualifying their bids in our Florida market for the impact of tariffs, so I decided to do some research to find out what people, including the press, are saying about the impact.  In the past year or two, tariffs have been imposed on Canadian lumber, which did affect that pricing.  This past summer, tariffs were rendered on Chinese steel, which had a dramatic effect on those prices.  The steel increases are interesting, since less than 1% of our domestic steel comes from China, and in fact, we export more steel to China than we import.

But that is in the past.  The question has to be, what can we anticipate coming up in the future, and should I be concerned about it?  A Google search can find anything, right?  So I did one.  The most recent article I found was dated early October, old news, and it dealt with the metal tariffs.  None of the trade or major media presses and not even AGC has a more recent article that would express concern over threatened tariffs and their impact on the construction industry.

So what does this mean?  It seems clear that the steel increases due to tariffs were largely media fabrications the industry took advantage of.  Can the media create future cost increases due to perceived tariff impacts?  Of course.  Will it stick?  A check of recent steel prices shows it is down approximately 15% since July 11.  Seems to reinforce the media fabrication theory.  And the lack of anything in the press seems to indicate that it should not be a big concern.

A question that really should be asked is what is the percentage of a construction project that is fabricated overseas?  Google could not answer that for me, but I sense it is significantly less than people fear.  If 50% of construction is labor, that leaves 50% that is material.  If 20% of that is imported, which I find unlikely, that would be 10% of the project.  If the tariffs are 20% on that 10%, that would raise overall construction pricing 2%.  Not insignificant, but not dramatic.

There is no doubt that construction prices are up dramatically due the robust economy and the shortage of skilled labor, and we could really use a little bit of a slowdown, but I see no reason to panic about cost increases due to tariffs, except temporarily at most.

Peter Douglas, P.E.
The Douglas Company


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