Construction prices jumped in April under the Trump administration’s newly imposed tariffs, prompting warnings from industry that price hikes could threaten growth nationwide and undermine the president’s celebrated tax reform.
Construction materials costs rose last month at the fastest year-over-year rate since 2011, according to an analysis by the Associated General Contractors of America. The producer price index for construction goods increased 1% between March and April and spiked 6.4% since April of last year.
Louisiana industry officials in March said they were expecting a price increase anywhere from 6% to 25% as a result of Trump’s tariffs. The industrial sector will likely be hit hardest, as economist Loren Scott predicted construction price increases could delay major industrial projects along the Gulf Coast.
The president announced new tariffs on steel and aluminum imports, at 25% and 10%, in March. Trump delayed the tariffs on some U.S. allies, including the European Union, Mexico and Canada, giving them time to negotiate final agreements. But the U.S. is in a dispute with Canada over lumber imports and has threatened to impose tariffs on numerous Chinese construction products.
These trade moves also pose a substantial threat to the construction industry. Contractors have had to raise their prices but are still falling behind on material costs, AGC of America reports.
“The new tariffs have the potential to undermine many of the benefits of the president’s recently enacted tax and regulatory reforms,” says AGC of America CEO Stephen Sandherr in a news release today. “Instead of investing tax savings in new personnel and equipment, many firms are being forced to use them to cover increasing steel and aluminum costs.”
The producer price index—from April 2017 to April 2018—increased 11.9% for aluminum mill shapes, 11% for lumber and plywood and 7.4% for steel mill products. Other construction materials that rose sharply in price include diesel fuel, 41.6%; copper and brass mill shapes, 10.5%; gypsum products, 7.5%; ready-mix concrete, 6.9%; and truck transportation of freight, 6%.
