Fast-changing tariffs spark confusion, fears of higher construction costs

By CHUCK SLOTHOWER

BridgeTower Media Newswires

The construction industry was whipsawed this week by President Donald Trump’s threats to impose the steepest tariffs on U.S. imports in more than a century before partially backing down.

A 10% blanket tariff rate on trade with most nations remains in place, as do tariffs of 145% with China.

On Wednesday, the construction industry breathed a sigh of relief after Trump announced he would pause for 90 days a vast array of tariffs intended to reduce trade deficits.

Still, the uncertainty of Trump’s fast-changing tariff policies could dampen the industry, officials said.
“Construction is one of those industries that’s sensitive to the general economy,” said Mike Salsgiver, executive director of the Associated General Contractors Oregon-Columbia chapter. “So when the economy’s doing well, construction tends to do well, and when the economy’s poor, it hits us.”

After a euphoric rise on Wednesday, markets headed sharply downward again on Thursday as the reality of existing tariffs sank in.

Despite Trump’s reversal on some tariffs, many import taxes remain in place on key trading partners and goods. The whirlwind of news this week has left contractors befuddled.

“Anything that creates unpredictability or instability is a major concern to this industry,” Salsgiver said.
Construction pros pointed to tariffs on Canadian softwood lumber, a key building material for single-family and multifamily residential building, as well as low- and medium-rise commercial buildings.

Canadian lumber is currently trading with a 14.5% tariff. But the U.S. Commerce Department on Wednesday released a determination that would more than double those tariffs, to 34.5%. The higher tariff rate would take effect when a final review is published in August or September, according to the National Association of Home Builders.

Lumber tariffs threaten to raise costs for a huge swath of construction projects. About a quarter of all lumber used in the U.S. comes from Canada.

“In the short term, costs are going to increase,” said Ezra Hammer, a land-use attorney at Jordan Ramis in Portland. “Whether domestic (timber) production can increase and become competitive is more of a medium-term opportunity.”

Lumber prices in particular are vulnerable to long lead times in everything from acreage planted to mill capacity. Trump has called for increasing timber production on federal lands, but it’s not clear when that product could begin hitting the market.

“It’s not as if you can flip a switch down at the mill and double capacity,” Hammer said. “It takes time to ramp up. That means there will be (price) shocks in the short term.”

Lumber is used on most buildings below a few stories, although mass timber buildings can reach up to 18 stories. That makes any increase in lumber costs far-reaching.

“We’re hearing from both single- and multifamily folks — they’re concerned,” Hammer said.

Single-family construction relies heavily on timber. That has home builders taking notice of Trump’s tariff moves.

“While the complexity of these reciprocal tariffs makes it hard to estimate the overall impact on housing, they will undoubtedly raise some construction costs,” National Association of Home Builders Chairman Buddy Hughes stated last week. Hughes praised Trump for maintaining exemptions on products from Canada and Mexico, and separately on timber.

Portland has seen little concrete-and-steel construction in recent years because of broader market conditions, including record-high office vacancies. That makes tariffs on steel a lesser immediate concern for construction, Hammer said.

“We’re not seeing a ton of steel-frame construction to begin with in the Portland region, so that’s not necessarily front and center for folks,” Hammer said. “The things clients are building these days are generally three stories or less.”

Contractors declined to comment or did not respond to messages seeking comment on the tariffs.
Tariff-driven cost increases are likely to hit federal contractors hard, Salsgiver said. Federal construction contracts typically lack escalation clauses that provide a cushion for rising costs.

“You just have to eat whatever comes along,” he said. Contractors can submit change orders, but public-sector project owners “are not usually very receptive to it,” Salsgiver said.

Higher costs “can create havoc in a very low-margin industry like construction is,” Salsgiver said. “It would really impact net profit in a major way.”

Private-sector construction has still not fully recovered from the pandemic slump, he said. And now comes a trade war.

“The ripple effects through the economy of this strategy are going to be significant —particularly in the near term,” Salsgiver said. “For a trade-reliant state like Oregon, this is not going to be a positive thing.”