Editor's Note
This editor’s note highlights the key facts and market implications behind “How Tariffs May Impact the Construction Industry”, with emphasis on sourcing, product fit, fabrication, logistics, or buyer impact.
If higher tariffs are prolonged, automotive manufacturers (in both conventional and electric vehicle spaces) could see higher costs. It’s likely we’ll see further price increases for imported vehicles from Canada and Mexico (roughly 25% of vehicles sold in the U.S.) and for those assembled in the U.S. that require inputs from our neighbors. Auto parts sometimes cross the U.S. border several times, given the highly integrated nature of the North American supply chain. Canada and Mexico are also the largest sources of U.S. exports of car and auto parts. In the face of retaliatory tariffs from those countries, US automakers could experience decreased sales.
How Tariffs May Impact the Construction Industry in 2025
Since taking office, President Trump has rolled out a series of tariffs on imported goods, shaking up global trade dynamics and the U.S. economy. The following summarizes the recent changes to tariff policies and Dodge’s initial take on how the construction industry will be affected throughout this year. In the 2025-Q1 forecast, Dodge assumed that the effective tariff rate in the U.S. would increase from 3% to 10% by the end of 2025, according to insights from Moody’s Analytics. As we begin to compile our preliminary assumptions around the next quarterly forecast, we now believe the trajectory of those tariff changes to be different. As of March 12th, the average U.S. trade-weighted tariff rate is already sitting at 8.1% (Wells Fargo). According to Moody’s Analytics, the effective tariff rate is now expected to peak in Q2-2025, versus the previously expected Q4-2025. Instead of reaching 10%, it’s broadly assumed that if all current and proposed tariffs are enacted this year, the effective tariff rate will reach 12%. Here’s a summary of some of the latest tariff policy changes and consequent retaliatory tariffs (as of March 12, 2025):
As of March 4th, the US has placed an additional 20% tariff on all imports from China. In return, China imposed a 15% tariff on select goods (including coal, LNG, and several food and animal products) and a 10% tariff on products like crude oil and agricultural machinery. They also plan to limit 15 U.S. companies from buying any Chinese goods without permission. As of March 4th, the US has placed a 25% tariff on all imports from Mexico, except goods covered by the USMCA – which face a 25% tariff on April 2nd. The US has also placed a 10% tariff on potash (fertilizer). Mexico plans to announce its retaliatory tariffs on April 2nd. As of March 4th, the US has placed a 25% tariff on all imports from Canada, except goods covered by the USMCA, which face a 25% tariff on April 2nd. The US has also placed a 10% tariff on energy products (e.g., crude oil and natural gas) and potash (fertilizer). As of March 4th, Canada had imposed initial retaliatory tariffs on $21 billion of US imports. As of March 4th, the Trump administration stated its intention to impose an extra 25% tariff on copper and lumber. This has not been enacted yet, and the start date is undetermined.
As of March 12th, the US has placed a 25% tariff on all steel and aluminum imports. Consequently, Canada imposed tariffs on an additional $21 billion of US-imported goods, including steel and aluminum. As of February 26th, the US plans to place a 25% tariff on all goods from the European Union, but this has not yet taken effect or been finalized. As of March 12th, the EU announced tariffs on $28 billion of US goods beginning on April 1st. As of March 4th, President Trump stated his intention to impose reciprocal tariffs on any trading partners that put tariffs on US products, beginning on April 2nd. Although, experts say that it could take over six months for those changes to occur. The most immediate risk to the construction industry will be to material prices. The U.S. construction industry will face higher input costs if producers are unable to find alternative products or inputs, pivot their supply chain, or receive an exemption on specific goods. Goods from Canada, Mexico, and China make up about 41% of US imports.
After stabilizing throughout much of 2024, input costs to construction remain roughly 40% higher than February 2020, according to the Bureau of Labor Statistics. In contrast to tariff increases back in 2018/19, producers and consumers have a limited ability to absorb further price increases in this already high inflationary environment. This would also disproportionately affect small and medium-sized businesses, which have less bandwidth to absorb those higher costs. Strong demand for construction in both residential and non-residential markets will also keep an upward pressure on prices this year.
Steel and aluminum prices:
According to the U.S. Department of Commerce, the US imports about 40% of its aluminum and 25% of its steel from Canada, and another 12% of its steel from Mexico. As of March 12th, the U.S. has placed a 25% tariff on all steel and aluminum imports coming into the country. In turn, Canada has retaliated with new tariffs on a cumulative $42 billion of U.S. goods – including steel and aluminum. Major U.S. steel mills and aluminum smelters could stand to benefit from tariffs as demand shifts domestically, and they can directly increase their prices. However, manufacturers who purchase their products will be confronted with higher costs. Steel and aluminum have widespread downstream uses in the construction industry – with applications in an array of building types, bridges, tunnels, rail lines, and within building products (appliances, electrical components, machinery, etc.).
Source: Read the original article | Published: March 14, 2025