If you have been paying attention to the news, you will know that the current Administration’s proposed new tariffs on steel and aluminum could have major implications to the metal construction industry. When the news broke a couple of weeks ago, it made headlines and rattled the industry. Cheers could be heard from U.S. steelmakers while jeers could be heard from companies that rely on importing steel, not to mention the U.S. allies who immediately rejected the proposed tariff. Over the past couple of weeks, initial concerns about the excise tariffs on aluminum and steel have somewhat relaxed after the administration softened its stance by offering exemptions, first for Canada & Mexico and then for additional allies including the European Union, South Korea, and Australia. This lowered the elation felt by U.S. steel and aluminum makers which showed in the market when US Steel dropped by 11%.
Yesterday, the NY Times reported that “the United States trade representative, Robert Lighthizer, told the Senate Finance Committee that the European Union, along with Argentina, Australia, Brazil and South Korea, would be exempt; Canada and Mexico were earlier left off the list of countries subject to the tariffs.” The countries Mr. Lighthizer list account for more than half of the $29 billion in steel sold to the United States in 2017. That could make the tariffs less helpful to domestic steel mills. Fast forward to today, it is quite clear that the new tariffs have a primary target and that target is China. Today’s headlines are implying a foreseeable “trade war.”
What does this mean for the metal construction industry? Groups like the Associated General Contractors of America have been quick to point out that steel and aluminum are major components of a large number of infrastructure projects and the tariffs could potentially undermine the administration’s planned $1.5 trillion infrastructure initiative. Though February’s report largely mirrors the ABC’s findings in January, the major change has been the new steel (25%) and aluminum (10%) tariffs announced earlier this month by the Trump administration. U.S. contractors and suppliers source materials from all over the world — either because of price considerations or because there is no domestic option. Being forced to pay more for materials could push construction costs to a point where some projects could be canceled or shelved indefinitely to monitor where prices land. The recent exemptions could ease the upward pressure on steel and aluminum prices as Canada is the largest single-country provider of both materials.
Other industry groups such as AIA and the National Real Estate Investor are already reporting on the effects of the tariff in the construction industry. Based on 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. These recent changes have allowed speculators to enter the market and further impact product prices.
We want to hear from you! What effects are you seeing, if any, or expect to see? We will continue to keep our eye on this developing story and the impact it will have in our industry. Post your comments.