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The Implications of Tariffs on the Construction Industry

There has been a great deal of discussion of late about impending tariffs, including a lack of clarity bordering on confusion about their structure and the short- and longer-term implications for the U.S. construction industry. These concerns are well warranted; the imposition and often mere threat of tariffs can cause price fluctuation in building materials. Steel, lumber, aluminum, and other materials see artificial volatility, thus affecting construction costs from top to bottom on projects large and small.

Additionally, the politics, ethics, and discussion of the longer-term effects of strong tariff policies can get dicey in different crowds and with clients, whether you are for or against. If you are in the lending, due diligence, or construction loan monitoring businesses, the question arises: How will these tariffs impact my future workload and ability to conduct business?

One architectural project manager recently has indicated to me that tariffs might never affect their business as much as it affects the construction industry, but tariffs will catch up with us. Although there may be some truth to that view, ancillary industries are more connected now than ever before. Nobody—from lenders, general contractors, owners, and engineers to related professionals—is insulated from newly imposed tariffs on large, exporting countries.

In the past year, tariff policies of the current administration moved quickly beyond saber-rattling to in-effect realities. In October 2018, President Trump threatened tariffs on another $267 billion in Chinese goods in an attempt to make things fair for the U.S. in recent trade dealings. Additionally, a new U.S. trade deal—the United States-Mexico-Canada Agreement, or USMCA—replaced NAFTA. This boded well for Canada but negatively impacted several thousand Canadian and Mexican laborers.

Some U.S. employers believe that tariffs, or the threat thereof, will bring jobs back to this country and have been the reason for recent strong economic readings and a spike in employment. Others believe the opposite is true, that impending tariffs equal impending doom and gloom for the U.S. building economy.

One thing is certain: There are no sure answers as to how new tariffs will play out in the immediate- and long-term. Global economics are never simple, and it is too early to tell. Whether or not tariffs will level the economic playing field for the construction industry, imported/exported goods, and the labor force inside and outside of this country has yet to be determined. What is most prudent is to begin strategic planning for a potentially challenging future in construction and ancillary fields.

Author

Joseph DiBernardo | Vice President, Construction Services Group Manager

Joseph, with a background in civil engineering, has over 23 years of experience in engineering design, consulting, construction monitoring, and project management. More recently, he has focused on construction loan risk management for national and international lenders, commercial banks, real estate management firms, private equity investors, tax credit unions, and reliance lenders. He is currently responsible for management of a technical staff of architects, engineers, and construction specialists; department sales/marketing; preparing proposals; client interface; and construction administration reporting to minimize construction risks for clients.

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