Tariffs and Immigration Crackdown
Weigh on U.S. Construction Industry
Material costs are rising, workers are
scarce and customers are delaying new construction plans.
President
Trump’s sweeping tariffs and stricter immigration policies are squeezing
America’s construction sector, threatening higher costs, labor shortages, and
project delays. Builders report surging prices for key materials like steel,
copper, and lumber — up as much as 13% year over year — while tighter
immigration enforcement is scaring off workers and stalling projects.
Contractors
such as Tony Rader of National Roofing Partners and Justin Wood of
Fish Construction NW say tariffs on Chinese and Canadian imports have added
thousands to construction costs, while some clients are delaying major projects
amid uncertainty. Industry data show construction added just 6,000 jobs through
August, yet faces a shortfall of nearly 500,000 workers.
Economists
warn the sector’s challenges could intensify as tariffs ripple through supply
chains. Though falling interest rates may revive demand, that rebound could
amplify cost pressures and deepen the strain on an already depleted workforce.
As Selma Hepp of Cotality cautioned: “We haven’t seen the worst of it yet.”
When
President Trump said he would enact sweeping tariffs and crack down on immigration,
dire warnings rang out in the construction industry.
The
policies threatened to push up building costs and deprive the industry of a crucial
pool of labor when high interest rates were already depressing building activity.
Those
forces are converging on builders, weighing them down in a potential drag on the
economy. Higher import taxes on steel, copper, lumber and other materials are lifting
construction prices and interrupting some jobs. Immigration enforcement is worsening
worker shortages and delaying projects.
“We
get so many things thrown at us in the construction industry,” said Tony Rader,
the chief relationship officer at National Roofing Partners, a commercial roofing
company in Coppell, Texas. “It just seems like every time we turn around, we’ve
got something else to fight.”
The
rising costs and understaffing could impede the momentum the industry is expected
to derive from lower interest rates, economists say. The effects could be most pronounced
in the housing industry, where elevated mortgage rates have discouraged homeowners
from moving and dragged down sales.
Mr.
Rader said tariffs on products from China had pushed up the cost of screws, plates
and other supplies. Mr. Trump said on Thursday that he and China’s leader, Xi Jinping,
had agreed to a one-year deal to reduce the overall tariff on many Chinese goods
by 10 percentage points, to around 47 percent.
The
possibility that immigration agents could target job sites has made some employees
reluctant to come to work even though they are in the country legally, he said.
He said one of his subcontractors had missed out on a roofing project near the U.S.-Mexican
border this year because he could not field a crew of workers.
His
clients are also worried about uncertain pricing and the possibility that staffing
issues could affect construction jobs. Some have delayed putting on expensive new
roofs, he said, and have asked instead for maintenance plans on existing ones. His
revenue is shrinking, and he is looking for ways to cut spending. He is budgeting
for slower growth next year.
Mr.
Trump has imposed tariffs on a wide range of materials and foreign-made products
that the construction industry needs. In addition to levies on steel and other metals,
tariffs on foreign timber, lumber and wood products like kitchen cabinets and bathroom
vanities went into effect last month.
The
tariffs are meant to encourage more domestic manufacturing. But so far, that
has not been the case.
The
complicated nature of supply chains means that it will take time for companies that
buy materials from abroad to shift gears. It is also unclear whether foreign suppliers,
American companies or consumers will shoulder the extra costs — and how much prices
will rise for consumers.
Earlier
this year, the National Association of Home Builders estimated that tariffs would
inflate the cost of building a typical home by $10,900. Prices on construction materials
have risen 2.3 percent from a year earlier, according to data from the Bureau of
Labor Statistics. Iron and steel prices are up 9.2 percent year over year, and copper
wire and cable have increased 13.8 percent.
Justin
Wood, an owner of Fish Construction NW, which builds starter homes in Portland,
Ore., said tariffs on lumber, drywall and heating equipment had pushed up his construction
costs $2,500 to $3,000 a home.
The
increase has been manageable, he said, because the homes he builds are meant to
be small and affordable — they are usually between 1,000 and 1,200 square feet and
cost about $250,000 to build.
Mr.
Wood said he was concerned about the price of lumber from Canada, which is subject
to a combined tariff rate of up to 45 percent. A lumberyard that he uses is looking
into acquiring more American lumber, he said, but may not succeed.
“If
they’re not able to source what we need locally, then they may have to buy it from
Canada, and that may ultimately be a price increase from the lumber side of things,”
he said.
Mr.
Trump’s immigration policy is also taking a toll.
Construction
this year added just 6,000 jobs through August. One analysis found that the industry
would require nearly half a million more workers this year to meet projected demand.
At
the same time, the industry’s unemployment rate fell to 3.2 percent, equaling its
record low. Those two data points suggest that the supply of available workers has
decreased.
“The current immigration policies are putting huge
stress on the work force,” said Michael Bellaman, the chief executive and president
of Associated Builders and Contractors, a trade group that endorsed Mr. Trump last
year. “There’s no doubt that that is problematic.”
A
survey conducted in July and August by another trade group, the Associated General
Contractors of America, found that more than a quarter of respondents had been affected
by Mr. Trump’s immigration enforcement actions.
The
Pew Research Center has estimated that undocumented workers made up 13 percent of
the construction industry in 2022. Companies are supposed to verify that their direct
employees are in the country legally, but they often outsource work such as roofing,
tiling and painting to subcontractors that make their own hiring decisions.
Andrew
Kaye, a luxury homebuilder in Milltown, N.J., said the presence of immigration agents
in Newark seemed to scare away some workers for a few days. “There was a ripple
effect,” he said.
Immigration
agents also recently targeted a home in the Chicago area where construction workers
were replacing windows and siding. The raid sent a chill through the neighborhood,
said Leo Feler, an economist and the home’s owner.
“This construction project is now stopped,” he
said. “I think construction in this entire neighborhood is now stopped because everyone
is so fearful.”
The
effects of the administration’s policies may become more visible in the months ahead.
Many of the most punishing tariffs have been in place only since August, so they
have not had time to work their way through the economy. Exporters and suppliers
may also be hesitant to pass on price increases if they think the United States
will negotiate trade deals or the tariffs will be struck down in court.
Elevated
rates, and the resulting pullback in demand for construction, could be reducing
the squeeze of higher costs and fewer workers.
Construction
spending has been fading since spring 2024, even with a rush of spending on data
centers. New home construction in August fell 6 percent from a year earlier and
is well below its pandemic-era peak.
If
interest rates continue to fall, suppliers will have more leverage to pass on costs
to customers. With immigration enforcement depleting the supply of available immigrant
workers, companies racing to staff projects would find themselves in steeper competition
for employees, driving up wages.
“We’ve
already seen some challenges, both in terms of the cost of materials being driven
higher and now the labor shortages being exacerbated by deportation policies,” said
Selma Hepp, the chief economist at Cotality, a real estate data provider.
But
she added, “I think we haven’t seen the worst of it yet.”
Steve
Martinez, the president of Tradewinds General Contracting, a homebuilder in Boise,
Idaho, has been tacking a larger contingency cost onto budgets for clients to mitigate
potential tariff-related price increases.
For
now, his expenses have not gone up as much as he predicted, which he largely attributed
to the slow pace of new home construction. He said he expected to build just seven
of the high-end custom homes that are his firm’s specialty this year, down from
10 to 12 usually.
“The
demand is not there, and so we haven’t quite seen the price escalation that we all
envisioned or assumed we would see overnight,” Mr. Martinez said.
He
hopes lower interest rates will reverse the housing industry’s slide. But he also
worries that stronger demand will end up amplifying the impact of the administration’s
policies.
“Had
we been really busy, I think we would have felt it a lot quicker,” he said.