President Trump has raised the tariffs on steel and aluminum to 50%, from the previous level of 25%. They went into effect this week and will continue “unless such actions are expressly reduced, modified, or terminated," according to a statement from The White House. Imports from the U.K. still come under the 25% tariff levels, with the potential of changes “depending on the status of the U.S.–UK Economic Prosperity Deal.”
The claimed reason for the increase was national security. The goal is to protect domestic metal manufacturing from “unfair trade practices and global excess capacity.” The 50% levels apply to the steel or aluminum contents of imports. Other contents of imports are subject to other applicable tariffs.
Already before, experts in CRE had predicted challenges with construction costs under the lower levels of tariffs on the metals. Concerns are higher now.
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“Steel prices, for instance, have already increased by 5.9% in April, and contractors are reporting double-digit jumps in their material budgets,” George Carrillo, CEO of the Hispanic Construction Council, told GlobeSt.com. “Nearly 22% of contractors have experienced project delays or cancellations directly tied to these tariffs. The construction industry uses about a third of all U.S. steel shipments, making it particularly vulnerable to these price hikes.”
“Assuming the Trump tariffs are judicially sustained, it will have price impacts on construction, particularly for multifamily housing and industrial construction,” says Carol Sigmond, a real estate and construction law partner at Greenspoon Marder. “Think about drywall studs, steel framing, rebar, sewer grates, fire doors and door frames, just to name a few items.”
The Institute for Supply Management’s Services PMI noted yesterday that the unpredictability of tariffs has thrown construction supply chains into “chaos” and that major HVAC equipment vendors are passing on cost increases.
"A sharp increase in steel and aluminum tariffs will only intensify the cost pressures already facing commercial construction,” says Garett Bjorkman, co-CEO of PEG Companies, a vertically integrated CRE owner, operator, and developer.
“We as developers are looking to secure commitments from our vendors now before the tariffs go into effect,” Rene Bello, founder and chief executive of BLDG Ventures, told GlobeSt.com. “We are also reviewing our sets of drawings to reduce the use of steel wherever possible. Some places, such as South Florida — where concrete and steel are used widely in our projects — simply will not be able to circumvent the issues. For example, most of the industry uses post-tension construction of floor slabs, which effectively uses steel as part of the construction assembly. So, there’s no way to work around this, especially in South Florida where, by code, we're required to use CMU for our buildings to tolerate higher wind loads and hurricane force storms seasonally.”
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