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Trump's steel tariffs are already squeezing the construction industry

Steel Yourself

Trump's steel tariffs are already squeezing the construction industry

A construction worker with steel rebar. (Guilherme Cunha/Unsplash)

Less than two weeks after President Trump signed sweeping 25 percent steel tariffs and 10 percent aluminum tariffs into law, the construction industry is already smarting, according to a report by National Real Estate Investor.

Although the tariffs exclude steel coming from Canada and Mexico (at the time of writing), interviews with developers and those in the construction industry suggest that some projects are already seeing steel increase in cost by up to 10 percent. The culprit is speculation about price increases six to twelve months down the line, after the full impact of the tariffs make themselves felt.

The panic isn’t without precedent. A 21 percent tariff imposed on imported Canadian timber in November of last year, used in 25 percent of wood-framed projects in the U.S., led to a nationwide rise in construction costs for single and mid-family homes. Contractors were forced to raise their prices, cut back on their use of timber, switch to steel, or change the design of their homes to use less materials.

Joe Pecoraro, a project executive at Chicago-based general contractor Skender, told National Real Estate Investor that a client developing affordable housing might be forced to delay their project if steel costs rose any further.

“Uncertainty drives people to be very conservative, risk-averse. It is affecting our deals,” said Pecoraro.

Ironically, domestic steel fabricators may be hit harder than international firms as a result of the tariffs only targeting raw steel. With costs rising for their raw materials, Engineering News Record has reported that some domestic fabricators have already lost jobs to competitors based in Canada and Mexico. 1.2 million tons of fabricated steel was produced in the U.S. with imported materials in 2017, which went towards building bridges, roads and buildings.

Two days before President Trump signed the tariff order, the AIA had released a statement warning that rising material costs would lead to decreased project budgets and potentially stifle architectural innovation. It remains to be seen how the tariffs will affect the country’s building boom in the long term, but those in the steel industry are still onboard.

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