Tariffs Could Increase Coating Product Costs
THURSDAY, DECEMBER 19, 2024
The construction and coatings industry are preparing for the potential impacts of tariffs suggested by president-elect Donald Trump.
At the end of November, Trump said he would impose a 25% tariff on imports from Canada and Mexico. He separately outlined an “additional 10% tariff, above any additional tariffs” on imports from China.
The scale of the tariffs, as well as how they are enforced, will determine how deeply construction is affected, said Chris Fisher, Managing Principal at consulting group Ducker Carlisle, in an interview with ConstructionDive.
“What will create challenges for commercial construction is if we see a significant amount of tariffs that are announced, followed through and then actually enforced,” said Fisher.
Broad enforcement could disrupt construction by increasing the costs of materials from specific countries, potentially delaying or deferring projects altogether, he continued. Products imported from China, including lower-cost commodity items such as certain metals, coatings, plumbing components and HVAC parts, could also see significant price increases.
Meanwhile, other types of steel, cement and aggregates, which are primarily sourced domestically, are less vulnerable to across-the-board tariffs, said Fisher.
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The construction and coatings industry are preparing for the potential impacts of tariffs suggested by president-elect Donald Trump. |
He noted the construction industry has seen tariffs announced in the past but emphasized their full impact depends on whether they have “teeth” behind them.
“We’re a long way from that,” said Fisher. “We don’t know what level of actual tariffs will be implemented and then how and what will be enforced.”
However, the impending possibility of these price increases comes at a time where project stress is already high, according to the most recent Project Stress Index from ConstructConnect. The PSI composite represents an equal-weight measure of the seasonally adjusted level of preconstruction projects that have experienced a delayed bid date, been placed on hold, or abandoned in the last 30 days.
For November 2024, the PSI rose 14.7% month-over-month, reportedly driven by sharp increases in on-hold (29.4%) and abandonment (31.9%) activity. The change in bid date delayed activity was negligibly lower for the month.
The report also found that current stress conditions are 20% above the average level of 2021. Despite this, the composite remains more than 5% below the level from the start of the year.
ConstructConnect explains that Trump has brought ideas and plans that could “substantially shift the business landscape and impact both existing and prospective commercial real estate owners and developers.”
Until these regulatory conditions begin solidifying in 2025, the firm anticipates that the industry could continue to see unusual volatility in stress conditions, especially if trade becomes severely disrupted between America, Canada and Mexico and the impact of the pricing and availability of critical construction resources.
November Input Prices
According to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics’ Producer Price Index data released last week, construction input prices were unchanged in November compared to the month prior.
Nonresidential construction input prices reportedly increased 0.1% for the month. Overall construction input prices are 0.5% higher than a year ago, while nonresidential construction input prices are 0.3% higher.
“Construction input prices are up just 0.2% through the first 11 months of 2024,” said ABC Chief Economist Anirban Basu. “However, that encouraging year-to-date price growth primarily reflects declining energy prices and obscures price escalation that has occurred for specific materials. Prices for copper wire and cable and softwood lumber, for instance, are up nearly 12% year over year.
Looking at the energy subcategories, prices decreased in crude petroleum (-3.3%) and unprocessed energy materials (-2%). However, natural gas prices were up 2.6% in November.
“While input prices have, in total, been well behaved, yesterday’s Consumer Price Index release indicated that economywide inflation reaccelerated in November,” said Basu. “The year-over-year rate of price increase, at 2.7%, remains close to the Federal Reserve’s 2.0% target, yet the recent uptick suggests that inflation may prove more stubborn than previously expected.
“This rebound in inflation aside, contractors remain optimistic about the coming year, with greater than 60% expecting their sales to increase over the next six months, according to ABC’s Construction Confidence Index.”
Tagged categories: Building materials; Coating Materials; Coatings; Construction; Economy; Government; Market; Market data; Market forecasts; Market trends; President Trump; Raw materials
