Threatened Tariffs on Steel, Aluminum Delay Purchases, Spark Uncertainty
When President Trump said on March 1 that he would impose tariffs of 25% on foreign steel and 10% on aluminum, it immediately put construction estimators and executives, and the suppliers they rely on, into a holding pattern.
Jeff Baxa, vice president of preconstruction at Barton Malow, Southfield, Mich., says, “We have already received letters from key suppliers stating that they will not quote any large steel projects, nothing more than one truckload, until they have a more specific definition of the tariffs being placed on the metals.” Baxa added, “They also told us they will not forward quote pricing right now for structural steel.”
The stakes are high. Although Trump had not yet formally approved the import charges at ENR press time, they were predicted to increase costs for consumers of foreign steel and aluminum. Other expenses could rise for construction companies and other consumers.
Ken Simonson, Associated General Contractors of America’s chief economist, said that prices already have risen for steel and aluminum. He said that further tariffs on imports of those materials “could wreck the budgets for numerous infrastructure projects and private nonresidential investments.”
The American Institute of Architects warns that the tariffs could sharply boost prices of materials that their members specify for projects. AIA President Carl Elefante and CEO Robert Ivy said in a statement, “these metal products are some of the largest material inputs in the construction of buildings.” (Ivy previously was a top editor and manager with ENR’s former parent, McGraw-Hill Construction.)
Potential targets of the tariffs were expected to retaliate with duties on U.S. products. The European Union, for example, is preparing punitive counter-tariffs on U.S. brands produced by companies or facilities in areas represented by Republicans in Congress, raising political pressure on Trump to end the plan.
Targeting $3.5 billion of American goods, the EU aims to apply its own 25% levy on a range of consumer, agricultural and steel products from the U.S., according to an EU list obtained by Bloomberg News. Trump does not seem worried about a dispute with the EU. He said on March 6 that a trade war “hurts them, it does not hurt us.”
What the threat of tariffs may mean is uncertainty, and that uncertainty is generally unsettling for engineering and construction firms because it delays project decisions.
“Any time a customer of an engineering or construction company does not know what the rules of the game are going to be, they just wait. That’s just bad for business,” says Andrew Wittmann, senior research analyst with Robert W. Baird & Co., Milwaukee. Wittmann says his firm does not expect shortages to affect existing projects but to have a deeper impact on the next wave of projects and their profitability.
The American Institute of Steel Construction sent a letter to the White House urging the administration to include fabricated structural steel in the products covered by the planned tariffs under the process described in Section 232 of the Trade Expansion Act.
“If it doesn’t include fabricated steel, there would be significant circumvention of the planned tariffs,” says Brian Raff, AISC director of government relations.
House Speaker Paul Ryan (R-Wis.) and other GOP leaders have also made statements opposing blanket tariffs. Senate Finance Committee Chairman Orrin Hatch (R-Utah) said in a statement: “Tariffs on steel and aluminum are a tax hike the American people don’t need and can’t afford.”
Some in Congress support Trump’s pro-tariff stance. Sen. Sherrod Brown (D- Ohio) said, “This welcome action is long overdue for shuttered steel plants across Ohio and steelworkers who live in fear that their jobs will be the next victims of Chinese cheating.” Brown was referring to Chinese steel companies’ overproduction and alleged dumping.