Tariffs expected to increase industrial construction costs in Louisiana

    The Trump administration’s newly imposed tariffs on steel and aluminum are expected to increase construction costs across the nation, including Louisiana, threatening the future on a number of industrial sector projects along the Gulf Coast.

    “They’re talking about a 6% price increase on steel and aluminum,” says Ken Naquin, CEO of Louisiana Associated General Contractors. “Let’s say it goes up 6%, it’s not a deal killer on any one project, but at end of the day, they’ll have to up estimates on how much a project costs. The industrial sector will feel it the most.”

    Louisiana economist Loren Scott contends construction prices could increase as much as 25%, equal to the amount of the new steel tariff. President Donald Trump on March 8 placed a 25% tariff on imported steel and 10% on aluminum in his effort to bolster U.S. manufacturing. Canada and Mexico are currently exempted from the tariffs as NAFTA negotiations continue.

    What’s most concerning, Scott says, is the nearly $100-billion worth of planned industrial projects in Louisiana that are both highly capital as well as steel intensive. While some estimate steel to be only 3% of building costs, Scott says for large projects—like the $9.4 billion Formosa facility in St. James Parish—that equals about $300 million.

    “Some folks who’ve announced projects now could say, ‘Maybe we better wait,’” Scott says. “To me, that’s the biggest impact.”

    The Louisiana Energy Export Association, along with The World Trade Center of New Orleans, released a statement today strongly opposing the steel and aluminum tariffs, noting that LNG facilities help grow Louisiana’s economy.

    “These tariffs run a high risk of derailing these investments and doing significant damage to Louisiana’s prospects for this unprecedented degree of economic progress,” the LEEA statement reads. “The proposed tariffs will increase the construction costs of LNG facilities and natural gas pipelines.”

    The tariff exemptions for Mexico and Canada do help, but Scott estimates the U.S. imports only a quarter of its steel from those countries, leaving the rest to other countries now under the new tariff. And those countries are expected to fire back.

    “The EU is not exempt,” Scott says. “They are naturally going to retaliate. They’re going to pick out products that hurt.”

    Another potential impact will be on offshore drilling. Louisiana had just recently gotten to a point where Gulf Coast drilling activity was poised to make a comeback, Scott adds, but the new tariffs and resulting price increases could act as a setback.  

    In response to the construction cost increases, Associated General Contractors of America is urging the Trump administration to boost domestic demand for steel and aluminum, such as by funding the president’s infrastructure plan, instead of using tariffs that harm domestic contractors and undermine construction demand, according to an AGC of America news release.

    “Tariffs may help a few producers but they harm contractors and anyone with a limited budget for construction,” said Stephen E. Sandherr, the association’s chief executive officer. “The best way to help the U.S. steel and aluminum sector is to continue pushing measures, like regulatory reform and new infrastructure funding, that will boost demand for their products as the economy expands.”

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