Tariffs imposed by President Donald Trump are taking a toll on the American construction industry, with companies and industry groups warning they will lead to fewer sales of homes and products and higher prices.
Stakeholders are ringing the alarms, slashing forecasts and advising the levies – which are ultimately paid by consumers or businesses in the importing country – will be inflationary.
Already, tariffs have impacted roughly $18.7 billion in annual construction steel imports, sending rebar prices soaring by more than 26 per cent, and added $14,000 to the cost of building a typical single-family home. Developers are now factoring in a hike of up to 20 per cent in material costs in 2025.
Industrial tools supplier WW Grainger has cut its forecast. The company missed its second-quarter profit estimates due to tariffs and earnings are expected to dip going forward.
The company has advised the wide-ranging tariffs have raised the cost of imported tools and industrial supplies, and squeezed margins for maintenance and repair companies.
“Performance in the second quarter was impacted by some tariff-related factors, which are also flowing into our updated outlook,” WW Grainger chairman and CEO D.G. Macpherson said in a statement.
The Lake Forest, Illinois-based company, which caters to industries such as home improvement retailers, construction businesses and aerospace manufacturers, expects 2025 earnings between $38.50 and $40.25 per share, compared with the prior view of $39 to $41.50.
A report by Off-Highway Research, which specializes in global construction equipment research, indicates tariffs have caused manufacturers to downgrade their forecasts for construction equipment sales in the U.S. market in 2025.
At the start of the year, it was anticipated there would be a four-to-eight-per-cent decline in market demand, but by May, that sentiment had worsened to the eight-to-13-per cent range. For the moment, Off-Highway Research is maintaining its original forecast for an 11 per cent decline in sales in the U.S.
Company managing director Chris Sleight said the U.S. has been a net importer of construction equipment since the 1980s, and there are some categories of equipment that are not made in the U.S., or only made by a small number of suppliers, so tariffs will add to the cost.
A significant volume of articulated dump trucks, backhoe loaders and telescopic handlers are imported to the U.S. from Europe, while motor graders and crawler dozers are brought in from Brazil.
“With no, or only limited domestic options available, tariffs will inevitably have an impact on construction equipment prices and will therefore depress demand,” says Sleight. “Domestic manufacturers will see higher input costs on imported components, which they will have to pass onto customers.
“These issues affect all suppliers in the marketplace. Even many of the larger American brands rely on overseas equipment manufacture to serve the U.S. market and source components from around the world.”
Off-Highway Research says U.S. manufacturers are also likely to face higher input costs due to tariffs on imported components and materials. However, the impacts are impossible to measure, as they are specific to each manufacturer and the structure of their supply chains. Mitigation actions will include finding alternative suppliers or alternative supply routes.
The company states tariffs are paid by the importing country when the goods are landed, so any claims or belief exporters to the U.S. would somehow pay is incorrect.
Tariffs are ultimately paid by consumers or businesses and they are therefore inflationary and unlikely lead to lower prices for consumers in the U.S., Off-Highway Research states. “The downside to this approach is that it leaves businesses with no clear idea of what tariffs they will face.”
Uncertainty is one of the hardest factors for businesses to cope with, the company says, because it makes it difficult to plan and budget, which often leads to paralysis in decision-making and adopting the most conservative approach by planning for the worst.
The Association of the Wall and Ceiling Industry, meanwhile, is warning that economic headwinds will lead to a decline in both the residential and non-residential construction sectors.
After five years of strong gains totaling over 40 per cent, the association is forecasting a much cooler two-per-cent increase in U.S. construction spending in 2025. While still positive, the group says the slowdown reflects broader economic headwinds and marks a shift to more moderate growth.
The non-residential construction index plummeted to 43.5 from 56.9 in the second quarter of this year, its lowest reading since 2020, with industry leaders citing rising costs and growing uncertainty.
However, the report forecasts that despite ongoing recession risks, construction spending is expected to grow modestly, with infrastructure leading the way, though inflation may offset perceived gains.
The Commerce Department’s Census Bureau has reported U.S. construction spending has already fallen, and mortgage rates have remained elevated as tariffs on imported goods have raised economic uncertainty, prompting the Federal Reserve to pause its interest rate cutting cycle.
In addition, a survey by the National Association of Home Builders shows sentiment among homebuilders has also plummeted, and there will be a decline in single-family starts this year.
