How Tariffs Affect Construction Prices

Ufema Contracting hopes everyone is having a great April! With the amount of rain we’ve experienced in Massachusetts this month, May will bring beautiful flowers! Many Americans are concerned about the new tariffs and how they will affect our everyday lives. But what is a tariff? A tariff is a tax paid on goods imported from another country by the importer. This tax is paid to the government belonging to the importer, in our case, the United States government. A tariff of greater size on specific items can raise the price for consumers since the seller still needs to make a profit.

Let’s discuss an example of a tariff: Company A imports a kitchen sink from another country. To import the sink, Company A must pay the tariff rate to obtain the sink to then sell it to their consumers. Since importing the product now costs more money, Company A can choose to increase the retail cost of this sink or absorb the tariff cost with a reduction in profit.

Lumber

A new tariff on all lumber imported from Canada, Mexico, and China can affect the construction industry. If a lumber company imports its product from Canada, it’ll have to pay a higher price, and that will cause a chain reaction directly affecting the consumers. The price of lumber used to build homes, garages, additions, or decks can quickly increase and, therefore, increase the construction costs. It is important to note that this will generally affect contractors who purchase their lumber from companies that import it. If a company sources its lumber from the United States, then the tariff wouldn’t apply since it’s not being imported. Don’t be afraid to ask a contractor or company where they source their materials; that way, you know what you’re paying. Supply and demand can also cause the price of larger wood such as 2x12’s and 2x10’s to increase. If a company sources from America but has a fast turnover rate, it might increase the price even though it may not be paying the tariffs.

Lumber has already been reported to have an increase of 10-15% to offset the expected tariffs. The increased price will also depend on where the lumber is sourced from. Canada will see a tariff increase of nearly 14%, causing it to about double to 30% tariff on imported lumber.

Other materials that are projected to be affected include metals like steel and aluminum. Both are used in construction, though steel is the primary metal when building commercial properties. Steel has seen a price increase of roughly 10% since the beginning of the year.

The increased tariffs worry a lot of homeowners who are planning their next renovation. If you worry about your renovation cost, reach out to the contractor to see if their price is increasing and what you can do to reduce the cost if it’s not within your budget. Each project should be discussed with a professional who can make sure the proper design and building codes are met for the job.  If you have any questions regarding a potential construction project, please request an estimate or give us a call at (978) 771-7936 to discuss your next project.