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Trump’s own tariffs making it harder to rebuild infrastructure

The Merchants Bridge is seen over the Mississippi River in St. Louis on June 27. The 127-year-old railroad bridge is at risk of being shut down if it is not replaced soon, but officials are struggling to find a way to pay for needed repairs, especially after tariffs were enacted on imported steel. (AP Photo/Jeff Roberson)

The Merchants Bridge is seen here over the Mississippi River in St. Louis on June 27. The 127-year-old railroad bridge is at risk of being shut down if it is not replaced soon, but officials are struggling to find a way to pay for needed repairs, especially after tariffs were enacted on imported steel. (AP Photo/Jeff Roberson)

By DAVID A. LIEB
Associated Press

JEFFERSON CITY, Mo. (AP) — President Donald Trump wants to rebuild the country’s transportation system. He also wants to strengthen the U.S. steel industry by placing tariffs on imports.

And that second goal could make it more costly to accomplish the first.

Since Trump announced new tariffs in March, prices have been rising for the American steel used to build bridges, reinforce concrete highways and lay rails for the country’s mass-transit systems. Although many ongoing construction projects have locked-in pre-tariff prices, concerns are nonetheless mounting among contractors and some transportation officials that the tariffs could raise costs and delay work.

“The president seems to be at loggerheads with two conflicting priorities of his administration,” said Brian Turmail, vice president of public affairs and strategic initiatives at the Associated General Contractors of America. “He’s making it very difficult for construction firms and people who build infrastructure to be successful, at least in the short term.”

In Kansas City, for example, voters recently approved higher sales and property taxes for a streetcar extension. The project had previously been expected to cost at least $250 million, but officials are now recalculating their estimates.

“We are anticipating our prices to increase because of the tariffs,” said Donna Mandelbaum, communications director for the Kansas City Streetcar Authority.

Trump announced a $1.5 trillion infrastructure plan in February that would use $200 billion in federal funds to leverage state, local and private investments. That plan had not even advanced in Congress when the president announced his administration would be placing a 25 percent tariff on imported steel and 10 percent on aluminum imported from most countries. After a temporary exemption expired, the metal tariffs hit the U.S. allies Canada, Mexico and the European Union on May 31.

Even before the latest polices, most federal transportation projects were already required by law to use U.S. steel. Because the new tariffs are making foreign steel more expensive, they are giving U.S. steel producers room to raise their prices without being undercut by international competitors.

The price of U.S. hot-rolled coil steel, a bellwether product for the industry, is up about 40 percent since the start of the year. This increase is a result both of Trump’s tariffs and of strong economic demand, said Joe Innace, the metals content director in the Americas at S&P Global Platts.

Prices have also been rising for specific transportation-related products, such as fabricated metal for bridges.

That has placed the owners of a 127-year-old railroad bridge over the Mississippi River near St. Louis in a quandary. If not replaced soon, their bridge is at risk of being shut down. Bids for the $219 million Merchants Bridge project were made in February, shortly before Trump announced his new tariffs. But in June, the administration denied a grant that would have financed a third of the project.

Bridge officials are now scrambling to raise money before July 7 — the deadline date for when they must decide if they go forward with the winning bid. Adding to their urgency is the price of steel. The replacement projects will require 12,500 tons of the metal.

“The bidding environment is not going to get better,” said Mike McCarthy, president of the Terminal Railroad Association of St. Louis, which owns the bridge. “In light of steel prices, I think they’re going to be creeping up.”

Some other states also are warily watching steel prices.

California already faces uncertainty because of an attempt to repeal a gas tax hike that’s projected to raise $52 billion for roads and bridges over the course of the next decade. The state Department of Transportation is watching closely to see if the new steel tariffs will raise material and”determine if adjustments may need to be made in future contracts,” said Mark Dinger, an agency spokesman.

In Pennsylvania, concerns that tariffs could drive up the cost of steel have officials watching for any consequences for their four-year construction plans, said Rich Kirkpatrick, a spokesman for the Pennsylvania Transportation Department.

Rhode Island transportation officials said they are allowing for retroactive cost adjustments in contracts to account for changes in steel prices. They have asked the Federal Highway Administration for permission to use federal money to cover those higher costs.

Steel-related products account for about 10 cents of every $1 spent on highways and bridges, although the percentage can be significantly higher for particular projects, said Alison Black, chief economist at the American Road & Transportation Builders Association.

Economic analysts say uncertainty about the duration and likely effects of the new steel tariffs could lead to some projects either being reduced in size or postponed. The ripple effect also could drive up costs for companies that make asphalt pavers, graders and other heavy equipment used in road projects.

Ned Hill, a professor of economic development at Ohio State University, said the situation will “raise havoc.” If construction companies try to bid six months to a year ahead of time, “they aren’t going to know what price to bid on. … And public works departments aren’t going to know how much the project’s going to cost them.”

Copyright 2018 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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