How New Tariffs May Impact Our Industry
As of March 4, 2025, the U.S. has implemented or threatened to implement significant tariffs affecting imports from Mexico, Canada, and China, which could have direct implications for the construction industry. While it is difficult to understand just how these tariffs will impact on our projects, we feel it is important to identify areas of possible exposure.
Below is a general summary of the possible impacts:
- Mexico and Canada: A 25% tariff has been imposed on imports from these countries, with Canadian energy products, including electricity, natural gas, and oil, facing a 10% tariff.
- China: An additional 10% tariff has been levied on Chinese goods, increasing the total tariff to 20% on these imports.
Impacted Materials and Products in Construction
Lumber and Wood Products
- Canada has historically been a major supplier of softwood lumber to the U.S. The tariff on Canadian lumber is expected to increase costs for framing and other wood-based construction materials. Up to 30% of the softwood lumber consumed annually in the U.S. is imported from Canada.
- Historically, tariffs on Canadian softwood lumber have led to increased lumber prices in the U.S. For instance, a 20.83% tariff previously resulted in a 0.3% to 2.3% rise in U.S. lumber prices.
- With the new tariff added to the previous tariffs we could anticipate up to a 5% increase in lumber prices. This of course does not anticipate additional impacts on the market due to speculation, market volatility, etc.
Conclusion
The new tariffs on Canadian softwood lumber are expected to lead to higher lumber prices in the U.S. These tariffs could have economic implications, particularly in our line of business.
Steel and Aluminum
The construction industry relies heavily on steel and aluminum for structural components, roofing, and siding. With the U.S. being the world’s largest importer of steel, sourcing 23% of its consumption externally, the 25% tariff on these imports will likely escalate costs for these essential materials.
Electrical Components and Appliances
- Many electrical fixtures, wiring, and appliances are manufactured in China. The increased tariff on Chinese goods will raise prices for these products.
- Switch gear for the most part is manufactured in the US. What is unknown at this juncture is the origin of the components incorporated into the switch gear.
Plastics and Polymers
China is a significant exporter of plastic materials used in piping, insulation, and fixtures. The heightened tariffs will likely increase costs for these materials.
Ceramic Tiles and Flooring
Imports of ceramic tiles and flooring materials from China and Mexico are subject to the new tariffs, leading to higher costs for interior finishes.
Kitchen Appliances
Most major appliance manufacturers have some level of offshore manufacturing. Some appliances brands are actually manufactured 100% in the USA. Costs of appliances may be impacted, and supply chain issues may arise.
Drywall
- The amount of drywall imported into the United States is relatively small compared to domestic production. The U.S. is largely self-sufficient in drywall production, with imports accounting for approximately 5-10% of the total drywall consumed in the country.
- The primary sources of imported drywall come from countries like Canada, Mexico, and some European nations. Canada, in particular, is the largest supplier of imported drywall to the U.S., due to geographic proximity and trade agreements like the USMCA (formerly NAFTA).
- Most of the drywall used in the U.S. is produced domestically by major manufacturers like USG, National Gypsum, and Georgia-Pacific, as the country has ample gypsum resources and manufacturing capacity.
Cement/Concrete
- Canada and Mexico account for 27% of U.S. cement imports and nearly 7% of U.S. cement consumption.
- The U.S. imported 5 million metric tons (MMT) of cement from Canada and 2 MMTs from Mexico in 2023.
- Texas and Arizona each represents roughly 30% of Mexican imports followed by California and Florida (20% each), reflecting 5% of cement consumption in these states.
Potential Impacts of the tariffs summarized:
- Increased Material Costs
- Project Delays
- Supply Chain Disruptions
By staying informed and adapting to these changes (hopefully during the preconstruction process), we can navigate the challenges posed by the new tariffs and continue to operate effectively. Obviously, the situation is fluid and as we learn more, we will keep you informed.