The cost of building things in the U.S. is still trending upward, and at a rate greater than overall inflation, Skanska executives said in a recent webinar.

Interest rates, tariffs and now diesel costs spiking amid the war with Iran can be expected to raise costs, the executives said in their 2026 briefing on Thursday.

“We think cost escalation in construction is going to outpace U.S. inflation, and fairly significantly,” said Steve Stouthamer, Skanska’s executive vice president for project planning.

Skanska’s composite cost index in the past year has risen 6.8 percent, which Stouthamer called “very significant.” Most markets will see inflation between 4 percent and 6 percent this year, he said.

Spiraling prices for diesel and regular fuel can be expected to reverberate through the construction industry, the executives said. On Monday, diesel averaged $4.91 per gallon in Oregon, up 66 cents in the past week, according to AAA.

Tariffs continue to boost costs, despite a U.S. Supreme Court ruling striking down some of the Trump administration’s levies on trade.

“It’s just the reciprocal tariffs that have been struck down — all of these other ones remain,” said Rob Cantando, Skanska’s director of strategic supply chain.

The duty paid on aluminum has risen 3.5 times since early 2025 when President Donald Trump first instituted a series of tariffs.

“This really shows how aluminum pricing has escalated in the U.S. above the rest of the world,” Cantando said, adding that it’s sending prices upward for curtain wall and storefront extrusions.

Copper and other building materials also remain elevated.

It’s not all bad news on costs, however. Manufacturers are beginning to catch up on demand for some building systems, including heating and cooling units.

“We are expecting lead times for HVAC equipment and electrical gear to fall this year, and that’s really due to expansions — (manufacturers) continuing to ramp up,” Cantando said. “There have been significant investments by many manufacturers in this area.”

Costs for plumbing fixtures, HVAC and electrical gear should begin to moderate due to the elimination of some tariffs, he said.

Activity in the construction industry is being propped up by massive tech projects — data centers and other tech-related megaprojects, driven by demand for artificial intelligence, data and cloud restructure.

Data center developers are expected to build 8 gigawatts of infrastructure this year, totaling 32 million square feet. In monetary terms, that’s a spend of an estimated $40 billion to $80 billion.

An estimated 50,000 to 75,000 electricians are working exclusively on data center construction, Skanska officials said.

“A few years ago, we had a number of regions in the country that could probably hide from what the data center impact was doing, but now that demand is spreading across the country to locations where there is power capacity (and) land availability,” Stouthamer said. “Most markets around the country are feeling the impacts of the significant growth in the data-center market.”

In contrast, traditional residential and commercial construction remain soft, the Sweden-based global construction giant reported last month.

“Interest rates have led to reduction in commercial work,” Stouthamer said.

Recovery in housing and other private sectors is likely to be gradual, hinging on further interest rate reductions, improved consumer demand and reduced input costs, Skanska stated in its winter 2026 report.

“More optimal conditions may not materialize fully until 2027, but even that is highly speculative,” the report stated.

Skanska officials recommended contractors forecast budgets to the midpoint of construction, not just the procurement stage. Other cost-conscious measures they recommended include having flexibility in project specifications, early planning with project partners and producing more frequent budget updates.

The post Construction costs rise sharply in U.S., Skanska reports appeared first on Daily Journal of Commerce.

By Chuck Slothower and Ethan Duran
91��Ƶ

Construction companies watching material prices should brace for uncertainty, according to experts, as president-elect Donald Trump .

On social media, Trump said one of his first executive orders will be to sign a 25 percent tariff on goods coming from Mexico and Canada, and an additional 10 percent tax on products from China. On the campaign trail Trump promised tariffs on imported goods and additional taxes on Chinese goods.

“On January 20^th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders,” Trump on TruthSocial. The president-elect added the moves were necessary to combat drugs and illegal immigration.

“This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our County,” he added.

The U.S. imports the most goods in the world from Mexico, Canada and China as its top-three importers, U.S. Census data showed. Because of how quickly the Trump administration wants to enact tariffs and how tariffs might drive up costs, economists from the largest construction associations said contractors will likely face uncertainty when managing materials prices.

“Heading into 2025 it’s unclear if prices will remain so well-behaved,” said Anirban Basu, chief economist of the Associated Builders and Contractors of America, in a statement. “The next administration’s trade policy increases uncertainty regarding construction materials costs. Beyond the implications of potential tariffs, input prices may rise in the short term if purchases rush to import materials prior to the implementation of those policies,” he added.

“Construction is more reliant than most industries on imported materials, parts and components,” said Ken Simonson, the top economist for the Associated General Contractors. “Because the industry is so diverse and obtains materials mainly through intermediaries rather than importing directly, it’s impossible to estimate the share of construction purchases that go for imports. Also, it varies by location as to whether contractors are using domestically sourced or imported materials such as lumber, steel or cement,” he added.

Simonson recalled when then-President Trump enacted 25 percent tariffs on steel and 10 percent on aluminum, which was followed by domestic producers raising prices and contractors experiencing supply chain problems. It’s not clear yet which items will be subject to tariffs and the effects, but another danger is the knock-on effects as other countries threaten to enact their own tariffs in retaliation, he added.

“Both the tariff-induced price increases and the responses are likely to be damaging to construction firms and to the demand for construction,” Simonson said.

If carried out, additional tariffs could result in higher prices for a wide range of construction materials, from Canadian softwood lumber — key for homebuilding — to concrete, glass and steel used in large commercial buildings and asphalt binder used in roads.

“Anything that contributes to further increased price of materials is never a good thing for the industry or the public, in our view,” said Mike Salsgiver, executive director of the Associated General Contractors Oregon-Columbia chapter.

“Tariffs should be a tool of last resort,” Salsgiver said. “We would rather see the administration engage in full-throated trade negotiations.”

Yet tariffs could be a boon to producers of domestically produced materials, such as Portland-based Timberlab, which is planning to build a mass-timber manufacturing facility in rural Millersburg, Oregon.

“That is going to present renewed opportunity for local production, particularly around mass timber,” said Ezra Hammer, a Jordan Ramis land use attorney in Portland.

Trump’s tariff talk may be only a negotiating position, said Jordan Schnitzer, CEO of Schnitzer Properties, a commercial developer and investment firm in Portland.

“I think President Trump will use that as a threat and not enact the draconian tariffs he’s talked about,” Schnitzer said.

Schnitzer said it makes sense to stand up to nations such as China that he said have committed widespread intellectual property theft. Intellectual property has long been a contentious issue in U.S.-China trade talks.

“China has taken advantage of the United States by basically learning and stealing its technology and ramping up its production,” Schnitzer said. “You can’t blame them, but I think we’re just waking up now that we need to strengthen our manufacturing in this country.”

Schnitzer said he was far more concerned by the prospect of an immigration crackdown than he was by tariffs.

“If President Trump starts going into businesses and rounding people up who don’t have U.S. citizenships, you will see construction projects grind to a halt, you will see service businesses in massive trouble.”

Tariffs could make project financing more unpredictable

While American-made products are important for the industry, the construction economy still relies heavily on imports, said Josh Levy, a partner and co-leader of Husch Blackwell’s Construction and Design practice at the law firm’s Milwaukee office. Materials prices were starting to stabilize after the pandemic and war in Ukraine, but now contractors might have to watch for rising materials and project costs he added.

“There’s concerns with how tariffs, if they are rolled out, raise the cost of materials for construction,” Levy said. “I think most people would prefer that the dollars get spent strengthening United States steel suppliers. The reality is that a construction economy relies on (imports), and we already saw a lot of price volatility in the past four years due to nonpartisan issues such as COVID-19 and war,” he added.

“Now injecting policy to make that material likely more expensive is going to impact how jobs move forward,” Levy said, noting that if the next president moves forward with mass tariffs on foreign producers it will raise the cost of construction for projects.

A developer raising money for a project has many plates spinning between different sources of funding, and all sources come together at a moment, Levy said. “And price fluctuation can disrupt putting the funding of a project together,” he added.

Some projects might wait until the materials market stabilizes, Levy said. Others might purchase materials ahead of time and hold on to them when projects are ready to receive them.

Contractors should keep their eyes on materials costs

Because uncertainty is a key feature with the Trump administration and trade policy, contractors will have to watch materials pricing closely in the early days, said Dan Wilson, an international trade and supply chain attorney at Husch Blackwell in Washington, D.C.

On the raw materials side, aluminum and steel will be a “target” for the incoming administration, the former central to a federal case over dumped aluminum extrusions in the U.S., Wilson said. Tariffs are expected to home in on Chinese steel sources and previously loosened trade restrictions on European steel are expected to be in jeopardy as well, he added.

Canadian softwood lumber suppliers fought hard to make progress as their products were subjected to raised tariffs in August, but that progress will likely be wiped, Wilson said. For materials further downstream, steel products in Mexico using inputs from China are on the table as well, he added.

China supplied the most goods to the U.S. and made up 16.5 percent of total goods imports, according to the Office of the United States Trade Representative. In 2022, China supplied $536.3 billion worth of goods, Mexico supplied $454.8 billion and Canada supplied $436.6 billion in imported products.

American manufacturers competing with imports will have benefits as purchasers seek alternatives, Wilson said. However, those who are physically further away from domestic producers will be most affected, he added.

“One other issue I’ve seen in construction and other infrastructure projects is different ways to assign the risk of tariff liability as a contractual matter,” Wilson said, noting contractors will triage events such as tariffs in their contracts with clients to offset risk.

“You’re really going to have to look at diversifying supply chains with an emphasis on U.S. production,” he added.

Acts such as the Infrastructure Investment and Jobs Act and the Inflation Reduction Act, which were signed by President Joe Biden with amendments preferring domestic suppliers, will likely be amended with tighter restrictions under the Trump administration, he added. Many of the preference rules are centered on steel, leading to more benefit for local steel manufacturers.

After preparing for four years, the Trump administration will likely be poised to flex its powers quickly with little challenge, Wilson said. Construction firms will have to watch and act quickly, as well, he added.

“This incoming administration has done its homework,” Wilson said. “For the last four years they’ve really poured over the statute books and found as many levers to give the president as much authority to act as quickly as possible without much Congressional oversight. So, we might even see quicker action than was the case in the first administration when it comes to tariffs,” he added.

The post Proposed tariffs could target the construction industry from many angles appeared first on Daily Journal of Commerce.

By Paul Wiseman
AP Economics Writer

WASHINGTON (AP) — President-elect Donald Trump has identified what he sees as an all-purpose fix for what ails America: Slap huge new tariffs on foreign goods entering the United States.

Earlier this week, Trump sent shockwaves across the nation’s northern and southern borders, vowing sweeping new tariffs on Mexico, Canada, as well as China, as soon as he takes office as part of his effort to crack down on illegal immigration and drugs.

In a pair of posts on his Truth Social site Trump railed against an influx of illegal migrants, even though southern border apprehensions have been hovering near four-year lows.

He said he would impose a 25 percent tax on all products entering the country from Canada and Mexico, and an additional 10 percent tariff on goods from China, as one of his first executive orders.

He said the new tariffs would remain in place “until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!”

The president-elect asserts that tariffs — basically import taxes — will create more factory jobs, shrink the federal deficit, lower food prices and allow the government to subsidize childcare.

Economists are generally skeptical, considering tariffs to be a mostly inefficient way for governments to raise money. They are especially alarmed by Trump’s latest proposed tariffs.

Carl B. Weinberg and Rubeela Farooqi, economists with High Frequency Economics, said earlier this week that energy, automobiles and food supplies will be particularly hit hard.

“Imposing tariffs on trade flows into the United States without first preparing alternative sources for the goods and services affected will raise the price of imported items at once,” Weinberg and Farooqi wrote. “Since many of these goods are consumer goods, households will be made poorer.”

High Frequency Economics believes the threats are not meant to support new trade policy and are instead a tool to elicit some changes along the borders and for imports from Canada, Mexico and China.

Though Vice President Kamala Harris criticized Trump’s tariff threats as unserious during her failed bid for the presidency, the Biden-Harris administration retained the taxes the Trump administration imposed on $360 billion in Chinese goods. And it imposed a 100 percent tariff on Chinese electric vehicles.

Indeed, the United States in recent years has gradually retreated from its post-World War II role of promoting global free trade and lower tariffs. That shift has been a response to the loss of U.S. manufacturing jobs, widely attributed to unfettered trade and an increasingly aggressive China.

Tariffs are a tax on imports

They are typically charged as a percentage of the price a buyer pays a foreign seller. In the United States, tariffs are collected by Customs and Border Protection agents at 328 ports of entry across the country.

The tariff rates range from passenger cars (2.5 percent) to golf shoes (6 percent). Tariffs can be lower for countries with which the United States has trade agreements. For example, most goods can move among the United States, Mexico and Canada tariff-free because of Trump’s US-Mexico-Canada trade agreement.

There’s much misinformation about who actually pays tariffs

Trump insists that tariffs are paid for by foreign countries. In fact, its is importers — American companies — that pay tariffs, and the money goes to U.S. Treasury. Those companies, in turn, typically pass their higher costs on to their customers in the form of higher prices. That’s why economists say consumers usually end up footing the bill for tariffs.

Still, tariffs can hurt foreign countries by making their products pricier and harder to sell abroad. Yang Zhou, an economist at Shanghai’s Fudan University, concluded in a study that Trump’s tariffs on Chinese goods inflicted more than three times as much damage to the Chinese economy as they did to the U.S. economy

Tariffs are intended mainly to protect domestic industries

By raising the price of imports, tariffs can protect home-grown manufacturers. They may also serve to punish foreign countries for committing unfair trade practices, like subsidizing their exporters or dumping products at unfairly low prices.

Before the federal income tax was established in 1913, tariffs were a major revenue driver for the government. From 1790 to 1860, tariffs accounted for 90 percent of federal revenue, according to Douglas Irwin, a Dartmouth College economist who has studied the history of trade policy.

Tariffs fell out of favor as global trade grew after World War II. The government needed vastly bigger revenue streams to finance its operations.

In the fiscal year that ended Sept. 30, the government is expected to collect $81.4 billion in tariffs and fees. That’s a trifle next to the $2.5 trillion that’s expected to come from individual income taxes and the $1.7 trillion from Social Security and Medicare taxes.

Still, Trump wants to enact a budget policy that resembles what was in place in the 19th century.

He has argued that tariffs on farm imports could lower food prices by aiding America’s farmers. In fact, tariffs on imported food products would almost certainly send grocery prices up by reducing choices for consumers and competition for American producers.

Tariffs can also be used to pressure other countries on issues that may or may not be related to trade. In 2019, for example, Trump used the threat of tariffs as leverage to persuade Mexico to crack down on waves of Central American migrants crossing Mexican territory on their way to the United States.

Trump even sees tariffs as a way to prevent wars.

“I can do it with a phone call,” he said at an August rally in North Carolina.

If another country tries to start a war, he said he’d issue a threat:

“We’re going to charge you 100 percent tariffs. And all of a sudden, the president or prime minister or dictator or whoever the hell is running the country says to me, ‘Sir, we won’t go to war.’ ”

Economists generally consider tariffs self-defeating

Tariffs raise costs for companies and consumers that rely on imports. They’re also likely to provoke retaliation.

The European Union, for example, punched back against Trump’s tariffs on steel and aluminum by taxing U.S. products, from bourbon to Harley-Davidson motorcycles. Likewise, China responded to Trump’s trade war by slapping tariffs on American goods, including soybeans and pork in a calculated drive to hurt his supporters in farm country.

A study by economists at the Massachusetts Institute of Technology, the University of Zurich, Harvard and the World Bank concluded that Trump’s tariffs failed to restore jobs to the American heartland. The tariffs “neither raised nor lowered U.S. employment” where they were supposed to protect jobs, the study found.

Despite Trump’s 2018 taxes on imported steel, for example, the number of jobs at U.S. steel plants barely budged: They remained right around 140,000. By comparison, Walmart alone employs 1.6 million people in the United States.

Worse, the retaliatory taxes imposed by China and other nations on U.S. goods had “negative employment impacts,” especially for farmers, the study found. These retaliatory tariffs were only partly offset by billions in government aid that Trump doled out to farmers. The Trump tariffs also damaged companies that relied on targeted imports.

If Trump’s trade war fizzled as policy, though, it succeeded as politics. The study found that support for Trump and Republican congressional candidates rose in areas most exposed to the import tariffs — the industrial Midwest and manufacturing-heavy Southern states like North Carolina and Tennessee.

The post Trump’s latest tariff plan aims at multiple countries. What does it mean for the US? appeared first on Daily Journal of Commerce.

For general contractors and other construction industry professionals, the cost of doing business could soon rise because of an increasingly hostile trade war between the United States and China.

The Office of the U.S. Trade Representative opted May 10 to increase tariffs on Chinese goods from 10 percent to 25 percent. Those goods include important building materials like alloy and steel. The original 10 percent rate was established in September 2018.

“This is actually a tax that American consumers pay, ultimately,” said Mike Salsgiver, executive director of Associated General Contractors’ Oregon-Columbia chapter. “The sooner you can eliminate tariffs, the better.”

Most people don’t understand that Americans are the victims of tariffs, Salsgiver said. Increases in material prices will just force general contractors to raise prices for their clients, he explained. For this reason, he said, AGC‘s members are generally opposed to any restriction on international free trade.

A study by the Federal Reserve Bank of New York found that the 10 percent duty increase last year brought the typical American household an annual cost of $419. According to the research, the raise in tariffs will bring that cost to $831 this year.

The increase in tariffs to 25 percent was first announced by the Trade Representative in December, with intent that it take effect in March. That announcement had a noticeable impact on the construction industry.

An economic analysis released in April by the National Association of Home Builders found that imports of residential construction materials from China had increased in December by more than 30 percent, just before the Trade Representative’s announcement. In January, those same imports decreased by more than 20 percent, which NAHB attributed to expectations of high tariff rates.

A survey conducted last week by the Monmouth University Polling Institute found that 62 percent of Americans believe consumers will bear most of the damage from Chinese tariffs.

A spokeswoman for Skanska USA, a branch of the world’s fifth-largest construction company, said the firm has not yet made a determination on the potential impact of tariffs, and doesn’t want to speculate without more information.

Ken Simonson, chief economist for the Associated General Contractors of America, likewise said he isn’t sure yet how general contractors will be affected. While he said he does have concerns about the price jump, he added that the magnitude of different goods that make up the industry make it hard to track exactly which impacts will be tangible.

As an example, Simonson said for smaller parts like fasteners, the price difference might be negligible enough that contractors don’t raise costs. Many contractors go through a servicer or distributor, and don’t always pay attention to changes overseas themselves, he added.

Another option, Simonson said, is to make design changes. He pointed to pile drivers, who might switch from steel piles to those made of reinforced concrete. When contractors and engineers come up with alternate solutions, they can avoid passing tariff costs onto consumers.

But alternatives aren’t always available, as trade wars have affected imports even on the same continent. While the Trump administration last month announced that it would lift tariffs on steel and aluminum imported from Mexico and Canada (before imposing a new tariff on Mexican goods to take effect June 10), tariffs are still in effect on Canadian wood. NAHB estimates these restrictions add an average of $9,000 to the price of a new house.

The construction industry is already in a precarious situation, Salsgiver said. While the economy is booming, profit margins have only slightly recovered from where they were during the recession, he said.

Even as the United States and China work toward a solution acceptable to both, it might be too late for American consumers, who could end up stuck with high prices even after the tariffs are reversed.

“Anything that increases costs is going to put downward pressure on what is already a fairly weak recovery,” Salsgiver said. “In our experience it’s pretty rare for costs to go the other direction, unless you’re in a recession.”

The post Trade war placing pressure on contractors appeared first on Daily Journal of Commerce.

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

The post Construction industry absorbs another blow appeared first on Daily Journal of Commerce.

The list of countries affected by President Donald Trump‘s newly enacted tariffs on steel and aluminum imports has not yet been finalized.

But the impact of a 25 percent surcharge on steel and a 10 percent surcharge on aluminum already is starting to mount as domestic suppliers, contractors and manufacturers try to get a handle on the new policy, which was signed into law only a few weeks ago. Some observers say the tariffs are good for domestic steel producers, while others say the surcharges have only served to increase prices of consumables.

“Everybody in the steel industry is going, ‘Yes, it’s about time somebody is stepping up to the plate,” said Cindy Stott, owner of C & L Metal Sales, a Northeast Portland firm specializing in structural steel material and decorative items.

The new tariffs have not had the impact on prices of raw materials some are suggesting, Stott said. Instead, she said this is just the latest step in a saga dating back to the run-up to the 2008 Olympic Games in Beijing, China. It was then, she said, that Chinese steel manufacturers ramping up to produce materials needed for the games started selling excessive quantities overseas. Even worse, much of that steel, she said, was inferior in quality.

“They were trying to build fast enough, and not producing the correct materials,” Stott said. “They were keeping the elite stuff and they were selling the rest.”

China is by far the largest manufacturer of steel in the world. As China goes, the industry follows. And Chinese steel and aluminum are entering the U.S. at such a scale that they constitute a threat to national security, according to a Feb. 16 report released by U.S. Commerce Secretary Wilbur Ross under auspices of Section 232 of the Trade Expansion Act of 1962.

Among the key findings of the Commerce Department’s investigation were that the U.S. is the world’s largest importer of steel and that it produces just one-quarter as much as it imports. Also, steel employment in the U.S. has fallen by 35 percent since 2000, according to the report. Meanwhile, world steelmaking capacity is up 127 percent from 2000, while demand for steel has slowed during the same period.

It’s a confusing market, and to some industry professionals, the latest tariffs have only succeeded in complicating their business.

“There has definitely been an impact on pricing,” said Abe Villarreal, longtime general manager at Eastside Steel in Portland. “It took effect more on the discussion of enacting (Section) 232, rather than the actual signature on paper. But we saw significant increases in the first quarter, rather than more recently. On light sheet metal goods and light tubing that is rolled, there has been in neighborhood of 20 percent increase. On heavy structural it’s been more in the nine to 13 percent range.”

As a fabricator, Eastside Steel produces a wide range of products for end users in the Portland area and further afield. As such, Villarreal said, the company already sets quality standards for raw materials that have allowed it to avoid the troubles described by Stott.

“As far as quality and dumping, maybe that’s been the case from a manufacturer’s point of view,” he said. “But in my personal world, we buy and sell raw steel product to manufacturers and we have very little issue with quality from oversea.”

Villarreal added that the large majority of raw steel purchased by his company is actually produced domestically.

“The mainstream media would lead the consumer to believe that we don’t roll steel in America anymore,” he said. “But most of what I see every year is American made.”

Despite that, Pat Prentice, general manager of The Lynch Company, a Southeast Portland steel fabricator, said the issue isn’t where the steel is produced but how much of it and at what cost.

“I think what’s worse than the price increases,” he said, “which is going to end up costing the consumers, not me, is that the availability isn’t there. The mills are now wagging the dog. They’re dictating when they roll different materials, so when there are critical jobs coming up and loans from the bank and crews are set up you can’t find the material you need.”

Prentice said he wished the Commerce Department planned better for these types of circumstances, which have happened before and are likely to happen again.

“The biggest problem is when you do something like put a tariff in place, it’s important to plan and not just have a knee-jerk reaction,” he said. “And I think the plan should have started off speaking with domestic mills and saying ‘Hey, if you hold your domestic prices down while we put tariffs on, we’re more competitive. But that didn’t take place. Instead, domestic mills raised their prices 25 and 10 and it didn’t change anything. Nobody benefited. All it was was a mandated price hike.”

The post Construction commerce complications appeared first on Daily Journal of Commerce.