AGC: Material prices growing fast, tariffs threaten more increases

Dive Brief:

In an analysis of the U.S. Department of Labor's producer price indexes and employment cost indexes, the Associated General Contractors of America found that material prices rose nearly 9% from May 2017 to May 2018 — the biggest annual increase in seven years — despite an only 4.2% increase in the price of construction for the same period. In addition, the AGC said the latest price data did not include hikes due to tariffs, which could pinch contractors even more. From April to May, material prices increased 2.2%.
Construction-related materials that saw a price increase year over year in May included aluminum mill shapes (17.3%), lumber and plywood (13.9%), copper and brass mill shapes (13.8%), steel mill products (10.5%), diesel fuel (44.5%), asphalt felts and coatings (8.9%), ready-mixed concrete (6.5%) and paving mixtures and blocks (5.2%).
Even though the steel and aluminum tariffs, which went into effect for Canada, Mexico and the European Union on May 31, are not reflected in this latest round of data, the AGC reported that U.S. steel mills have been inundated with orders that exceed capacity. This is likely to create construction delays and force budget overruns, which could lead to cancellation of some projects.

Dive Insight:

Even though the 25% tariff on steel and the 10% tariff on aluminum have only been in effect for a relatively short amount of time, they have already negatively affected American businesses, according to Bloomberg. This includes the construction industry as some developers have delayed their capital programs, or are considering doing so, because of uncertainty around the impact of the tariffs. This is especially true for those who source material from abroad.

However, the tariffs seem to be making a positive impact on steel-town communities, as mills hire additional workers to keep up with the demand for American-made steel.

Canada, Mexico and the European Union wasted no time announcing retaliatory trade measures against the United States after President Donald Trump decided that the tariff exemptions extended to them in March would no longer be valid. Canada said it would impose tariffs on steel, aluminum and other goods from the U.S. relative to the value of Canadian exports affected by the U.S. duties, which the Canadian government estimated at nearly $13 billion. Canada and other nations, including China, are looking to the World Trade organization to help resolve the dispute.

India is the latest country to take action against U.S. goods in response to the administration's tariffs. The Indian government has proposed tariffs on 30 U.S. products, a move which is intended to recover the $241 million the country says it will lose to U.S. tariffs.