When President Donald Trump cited national security concerns and signed orders in March imposing significant new tariffs on imported steel and aluminum, the construction industry was thrown for something of a loop.

While domestic steel and aluminum manufacturers praised the move, many people in the construction industry warned the new tariffs would result in rising costs for end users of those metals. Three months later, the results are by no means definitive, but the prices of both steel and aluminum indeed have continued to rise.

And following a last week that a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum would also apply to such materials from Canada, Mexico and the European Union, many observers now are bracing for the trend to continue.

“It’s been crazy,” said Chris Madden, estimator and project manager for Madden Fabrication. It makes a variety of carbon and stainless steel products for industrial and commercial clients.

Costs of steel and aluminum products are changing so rapidly it has become difficult to adhere to price quotes, Madden said. They no longer last 30 days, he said.

“Now, it’s just a single day,” he said. “So when I go get a quote, that price is only good for a day. So, I’ve had to modify my quotes to be able to hold them.”

The biggest price jumps actually took place in March and April, after the tariffs were introduced, Madden said.

“It depends on whether or not it involves exotic metals,” he said. “Standard steel pricing has usually been pretty plateaued, and when they released the tariffs that was when it seemed like it was going up. It’s not as bad now; it’s kind of plateaued out.”

Many steel suppliers raised their prices when tariffs were instituted, according to Brian Turmail, executive director of public affairs for the Associated General Contractors of America. Those hikes have been 15 to 20 percent for products such as rebar, carbon plate and merchant bar.

The U.S. imports more steel – 35.6 million tons in 2017 – than any other country, so this is a big deal.

“These price increases are particularly difficult for firms that are engaged in fixed-price construction contracts where they are forced to absorb these cost increases,” Turmail stated via email. “Moving forward, it is safe to assume that contractors will factor the recent and likely additional increases in steel and aluminum prices into their bids, raising the cost of all manner of construction.”

The tariffs have not been imposed equally. Some countries, including South Korea, Brazil, Australia and Argentina, have come to their own separate arrangements in order to bypass the tariffs. For instance, the South Korean government agreed to reduce its steel exports to the United States by 25 percent in order to avoid the tariff.

Sean Henning is the sales manager for Brown-Strauss Steel. The Longview, Washington, firm sells wide flange steel, tubing and other products to clients along the West Coast. Each product the company sells has been affected differently by the tariffs, he said.

“The products we sell the most of is the wide flanged and tubing,” he said. “So all the pipe has been affected quite a bit by it, but it’s a small percentage of the products that we sell. It’s had an effect in the short term, but it’s difficult to know what the effect will be long term – even played out over the balance of the year is long term.”

Like Turmail, Henning said that many suppliers appear to have purchased significant steel and aluminum stock following the introduction of the tariffs in March. At the same time, he added, domestic mills raised their own prices in response. Finally, domestic demand overall for steel has continued to rise. Each of these factors is playing a role in price fluctuations.

“Part of that is just the thought of there being tariffs at the beginning of the year,” Henning said. “It caused some of us to come off the sideline and prepurchase or put projects from the slow to the fast lane so they could buy in advance … so it’s difficult to know how much of that demand was folks purchasing in advance or for projects materializing over the summer or demand in general.”

According to a June 1 report released by Farwest Steel, which sells metal products to fabricators across the West and has offices in Eugene, Medford and Vancouver, Washington, Chicago shredded scrap prices decreased slightly in May but overall were up by $107 a ton since December. Sheet, tube, merchant bar and beam mill have all seen price increases as of mid-April, the report states, but some of that can be attributed to logistics costs that are causing domestic steel mills to re-evaluate shipping rates.

Further exacerbating the matter, Canada, Mexico and the EU all announced after learning they would be included in the tariff scheme. Canada and Mexico alone account for 26.1 percent of U.S. steel imports.

End users of those products can now only wait to see what happens next.

“It all depends on where we’re getting our steel,” Madden said. “It depends where our suppliers are getting steel. The people that are really going to see changes are my suppliers. We’re still at a point where our suppliers are sitting on stock they probably paid a quarter of what they’re charging me. It’s whatever they can do to get more money out of you.”

While suppliers are able to pass costs on to their clients, contractors – especially those involved in fixed-price projects – lack such flexibility.

“The irony is that by raising the cost of construction, these tariffs are more likely to depress demand for new steel and aluminum products than increase domestic production,” Turmail stated.

Incoming steel

The top 10 steel exporters to the United States, ranked by percentage of total U.S. steel imports, :

1. Canada, 16.7 percent
2. Brazil, 13.2 percent
3. South Korea, 9.7 percent
4. Mexico, 9.4 percent
5. Russia, 8.1 percent
6. Turkey, 5.6 percent
7. Japan, 4.9 percent
8. Germany, 3.7 percent
9. Taiwan, 3.2 percent
10. China, 2.9 percent

Source: Wood Mackenzie

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