President Donald Trump has repeatedly called tariffs "a beautiful word," but construction executives are bracing for the consequences of higher prices, potential disruptions in the supply chain, and ongoing trade uncertainty. Industry experts warn that these changes, particularly in material costs and availability, could have the most significant impact on complex equipment used in construction, such as those in heating, cooling, and elevator systems.

“We see concerns that tariffs will negatively impact demand and therefore the production of goods,” said Serena Crivellaro, managing director of KPMG's engineering and construction team. “There’s very little that’s actually 100 percent American-made and would be fully exempt from the tariffs. So, the impacts of these tariffs could be really wide-sweeping.”

These remarks came during a market update call hosted by Skanska USA, a major construction firm, just one day before Trump announced 25 percent tariffs on all steel and aluminum imports to the U.S. While there was a brief period of speculation about backing off the tariffs, the administration proceeded with implementing the 25 percent levies.

Tariffs and Trade Uncertainty Escalate Construction Concerns

The steel and aluminum tariffs are only part of a broader range of trade restrictions Trump has introduced since January, affecting specific goods and nations, including the U.S.’s largest trading partners. Many countries have retaliated with tariffs of their own, creating a domino effect that continues to reverberate across various industries. Furthermore, Trump has delayed or rescinded tariffs based on the actions of other nations, causing more confusion and uncertainty.

Even more tariffs, including a 25 percent levy on goods from Mexico and Canada, are expected to be imposed by April 2. Construction executives have highlighted that it’s not just the tariffs themselves that are problematic, but the uncertainty surrounding them.

“It’s really the uncertainty of the tariffs that might actually be worse than the tariffs themselves,” said Tom Park, vice president of strategic supply chain at Skanska. “Tariff threats make it difficult for businesses to plan,” added Crivellaro. “Uncertainty is causing almost a tax on the economy. Businesses pause hiring, they pause investment plans; consumers pause on the big-ticket purchases.”

The unpredictability of tariffs is especially concerning for the construction industry, where materials cross borders multiple times or include components that are taxed both for their origin and type. Park illustrated this complexity with the example of a chiller—a piece of equipment used in many high-tech systems—that could be made up of steel fabricated in the U.S., wire from China, pipes from India, components from Mexico, and raw materials from various other countries.

“We do really have a global supply chain when it comes to this type of equipment,” Park explained.

Impact on Large Construction Projects

The 25 percent tariffs on steel and aluminum have already led to increased costs for materials, according to Park. However, the good news is that, so far, supply chain disruptions have been minimal, and lead times for materials have remained stable. Still, the long-term impacts are a cause for concern.

Steve Stouthamer, Skanska’s executive vice president of project planning, described how the company is closely monitoring the situation. “I’d never thought I’d have to be a tariff expert, and I still don’t consider myself one,” he said. Skanska has been working to estimate the potential costs of tariffs on large projects. For example, for a $375 million patient care facility, Skanska predicted that the impact of steel and aluminum tariffs could reach approximately $6.2 million, or 1 to 2 percent of the total project costs. If the anticipated April tariffs come into effect, these costs could rise to 4 to 5 percent.

Broader Economic Impact: Tariffs and Federal Cuts

In addition to tariffs, other administrative actions could also impact the growth of the construction industry. Crivellaro noted that deep cuts to federal agencies or even eliminating certain agencies entirely could further stifle growth. "That’s not good news for growth either," she said. “If the government was buying pencils, let’s say, and now that agency doesn’t exist anymore, those pencils are not bought. That actually does remove a certain number of pencils from the (gross domestic product). It reduces the output of that pencil factory, the number of people employed by that.”

A Historical Perspective on Tariffs

Economists and business leaders have long argued that tariffs are essentially taxes on imported goods, ultimately passed on to consumers. Adam Smith, the father of modern economics, wrote in his influential book The Wealth of Nations that tariffs “impose a real tax upon the whole country.” President Trump, however, has repeatedly expressed skepticism of free trade and its effects on the U.S. economy. In a 1990 interview with Playboy magazine, Trump harshly criticized trade deals, claiming that the U.S. had been “outsmarted” by its trading partners.

In his March 4 address to Congress, Trump reiterated his view on tariffs: “They’re about protecting the soul of our country. Tariffs are about making America rich again and making America great again. And it’s happening. And it will happen rather quickly. There’ll be a little disturbance, but we’re okay with that. It won’t be much.”

Ongoing Trade Tensions and Construction's Future

As the trade war continues, construction leaders are left navigating an increasingly uncertain environment, where the costs of materials and long-term planning are impacted by both tariffs and retaliatory measures from other countries. The unpredictability surrounding these trade policies makes it difficult for businesses to make investment decisions or plan for future projects.

Industry professionals remain hopeful that clear trade policies and a more stable supply chain will emerge, but for now, the construction industry is adapting to a rapidly changing landscape with a level of caution that could continue to shape the sector for the foreseeable future.

Originally reported by Chuck Slothower in DJC Oregon.