Tariffs are Taking a Toll on Construction

Good or bad, there is no denying tariff’s are having an impact on the construction industry.

The one-two punch began with the taxation of imported lumber in late 2017 and was followed by 25 and 10 percent tariffs on imported steel and aluminum, respectively, both of which went into effect in 2018. The goal is to incentivize American companies to shop locally, so to speak, and purchase materials from producers within the U.S.

On the surface, this arguably pro-American measure seems like a good thing. Who can argue against boosting the economy and/or the creation of new jobs, right?

But what people fail to realize is the tariffs are eliminating just as many jobs as they create. An estimated 28,000 construction workers will lose their jobs as contractors attempt to offset the cost while American producers opportunistically hike prices to record levels.

To put things in perspective, construction accounts for more than 40 percent of all steel shipments in the U.S., with aluminum close on its tail. The latter has become the second most common metal used by general contractors, primarily because it’s resistant to corrosion, lightweight and malleable. So, saying firms rely on a steady flow of metal would be an understatement.

As a protective measure, construction companies have been forced to incorporate these higher costs into their bids, but even so, fluctuating prices are making it more and more difficult to estimate projects. Provisions reflecting material escalation and changes in law or conditions will possibly provide some relief, but aren’t necessarily the best fit for this situation since they typically provide for unforeseeable circumstances.

In this situation, the writing is on the wall as steel, aluminum and timber prices continue to rise, just as demand threatens to overtake availability.

As a result, GCs need to be not only conscious of inflating costs, but the potential delays they face should materials become scarce. The way things stand they run the risk of needing additional time to complete projects due to factors beyond their control as the demand for quality metal exacerbates the shortage of craft labor.

At Jackson Executive Search, we do our part by providing construction companies with the leadership they need to thrive in these economically turbulent times. Having survived two recessions, we have the expertise necessary to guide you along the road to success in a cost-effective manner.

Leave a Reply

Your email address will not be published. Required fields are marked *