U.S. Construction Spending Dips After New Tariffs
Emily Pollock posted on May 09, 2018 | | 1829 views
The American construction industry saw a dip in spending after President Trump announced his new steel and aluminum tariffs. (Photo courtesy of Mark Baron Construction)
The American construction industry saw a dip in spending after President Trump announced his new steel and aluminum tariffs. (Photo courtesy of Mark Baron Construction)
According to the U.S. Commerce Department's census, American construction spending was down in March, but still up from the previous year.

The seasonally adjusted rate of construction in March was $1.285 trillion, down 1.6 percent from February's revised estimate of $1.306 trillion. But despite the drop, U.S. construction spending remained up 3.6 percent over the March 2017 rate.

While public sector spending stayed level with February rates ($297.2 billion to February's estimate of $297.3 billion), private sector spending went down relatively dramatically. Residential construction took the brunt of the drop, with a 3.5 percent decrease. This marks the biggest decline since April 2009, when the market decreased by 4.2 percent. And, within residential construction, multifamily units (like apartment buildings) took the worst of the fall. Multifamily construction spending has been dropping for three months, putting it at 8.2 percent below the March 2017 rate.

Some in the industry wonder if the change is connected to the White House's recent tariffs on imported steel and aluminum, which President Trump announced at the beginning of March. A late March study by the National Association of Realtors predicted that construction would be one of the industries hardest-hit by the tariffs. Observers fear that the 25 percent tariff on steel and 10 percent tariff on aluminum might raise the cost of construction, as it relies so heavily on the two as raw materials. "The price increases in steel products that have been introduced since the tariffs were announced have made the difference between making money and losing money on many contractors' projects," said Stephen E. Sandherr, CEO for Associated General Contractors of America. "That is because firms that bid projects before the tariffs were announced are being forced to pay more for steel products than they anticipated when they submitted their project bids."

And while many in the industry are heartened that Trump will be holding off for at least another month before imposing tariffs on key trade partners like Canada and Mexico, uncertainty over the duration of those exemptions has construction companies spooked.  "The administration's new steel tariffs appear to already be having a negative impact on demand for many types of construction services," said Stephen E. Sandherr, CEO at Associated General Contractors of America. "Not only are contractors getting squeezed by higher prices for steel and aluminum products, but it seems many private sector developers are rethinking some investments amid growing fears of a trade war."

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