Trump’s proposed steel and aluminium tariffs spark industry concern

US President Donald Trump reads about tariffs on steel and aluminium, as Howard Lutnick stands in the background, in the Oval Office of the White House in Washington D.C., US, 10 February, 2025. (Image: REUTERS/Kevin Lamarque)

From economists to auditors and representatives of the US steel industry, experts are cautioning the Trump administration and the public about the potential pitfalls such a policy could create.

Doug Carlson, CEO of the National Utility Contractors Association (NUCA), asked President Trump to “reconsider” his approach.

“NUCA urges the Trump administration to reconsider the pending tariffs on steel and aluminium, at least with regards to materials used in domestic infrastructure projects,” he wrote. ““The coming tariffs will only delay critical infrastructure projects and drive up their costs to the taxpayer. Much of America’s underground infrastructure relies upon EPA and other government resource funds to build or repair its water and wastewater projects.”

Doug Carlson, NUCA

NUCA is trade organisation representing US-based construction companies in the excavation, utilities and telecommunications segments.

Carlson said, in his opinion, the ultimate goal of the tariffs (to reshore production of the materials in the US) may be misguided.

“Much of our federally-funded work through recent infrastructure laws is already subject to domestic iron and steel sourcing requirements,” he said. “America’s construction industry already supports – through practice and ‘Buy America’ regulations – the use of American-manufactured products, and we encourage the Administration to examine regulatory roadblocks that drive manufacturing of industry-demanded products overseas.”

The Association of Equipment Manufacturers (AEM) said its representative segment was “alarmed”.

“Equipment manufacturers are alarmed by the Trump administration’s decision to impose sweeping tariffs on steel and aluminium, which will further escalate trade tensions and add to global economic uncertainty,” AEM said. “This round of tariffs, and the retaliatory tariffs that will follow, will raise the price of steel and aluminium domestically and drive up the cost of manufacturing equipment in America.”

Brian Kassalen, a principal with US-based professional services firm Baker Tilly, put it bluntly. 

“The bottom line is tariffs are a game-changer for construction – and not in a positive way,” he said.

How would steel and aluminium tariffs impact US construction?

Ingots of aluminum and rolls of steel stored at a quayside. (Image: Adobe Stock)

Kassalen added, “Tariffs could mean higher costs on raw materials like steel, aluminium. This directly affects construction project budgets and supply chains. The proposed and newly enacted tariffs are creating chaos in the construction bidding and estimating process.”

AEM suggested the consequences of tariffs have been clear throughout year history, and they’re largely negative.

“We have been clear about the damage that tariffs on critical manufacturing inputs will inflict on equipment manufacturers and the 2.3 million men and women who build equipment in America,” AEM said. “Tariffs have already contributed to higher input prices, disrupted supply chains, and created uncertainty for equipment manufacturers.

“The decision to impose tariffs on all steel and aluminium imports into the United States will significantly drive up the cost of producing equipment in the [US] by as much as 7% and put American jobs at risk.”

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Morningstar DBRS – a Canada-based global credit rating agency, and the fourth largest in the world – also found few positives in Trump’s proposed tariffs on the metals.

“[The proposed tariffs have] trigged a surge in the share prices of US steel and aluminium producers but simultaneously fuelled concerns about the profitability or even viability of many future capital projects in the US.”

Morningstar noted current construction project are likely to be “insulated from the impact” of the tariffs, but noted future starts could be hampered by price escalations.

“Civil or social infrastructure projects are… expected to be directly affected,” the firm said. “Higher tariffs will inflate the costs of US contractor who rely on materials sourced from Canda or Mexico.

“The US construction industry will likely suffer at least a temporary supply chain disruption if a deal cannot be reached in the near term. This could be particularly troubling for projects being delivered under fixed-priced construction contracts that have already suffered from high inflation and labour shortage issues over the past several years.”

Morningstar noted in some instances, however, the impact could be less dramatic.

“Different states have different levels or reliance on imported steel and aluminium. For example, Illinois and New York have a relatively high reliance on imported construction-grade steel and aluminium, while Indiana and Alabama have a low reliance” due to domestic productions, Morningstar said.

Baker Tilly’s Kassalen noted potential snags for the homebuilding segment. 

“Besides the structural framing and exterior cladding, steel or aluminium is often used in parts of a home, like window casing and doors, appliances and interior fixtures, and HVAC systems,” he said. “With rising material costs, homebuilders may need to slow down construction and increase home prices, all while feeling pressure on profit margins.” 

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One more US construction segment – digital infrastructure, which includes data centre builds – should not be overly impacted, Morningstar noted. “However, a severe impact is expected on the development of certain renewable energy projects, particularly wind farms.

“The Trump administration’s recent executive order has already dealt a crippling blow to the US offshore wind sector in its infancy.”

With steel making up more than 70% of wind turbines, Morningstar theorised that “tariffs of this magnitude will likely raise wind turbine prices immediately, making the economic viability of these projects questionable.”

AEM added, “While we strongly support the Trump administration’s goal of strengthening our trade relationships and creating fair and favourable terms for America, tariffs will disrupt supply chains, threaten market expansion, place unnecessary strain on customers, and undermine our global competitiveness.”

Domestic production of steel/aluminium won’t turn overnight

Galvanised steel coils are moved at a shipping yard. (Image: Adobe Stock)

Driving part of the anxiety in the industry on tariffs for steel and aluminium is that major increases in domestic production would take considerable time, which could cost some projects and companies dearly.

“[Builders] could try to switch to a US supplier, but switching suppliers isn’t easy, and US raw materials will likely cost more as the domestic market becomes more competitive,” Kassalen noted.

NUCA’s Douglas added, “The macroeconomic effects of these new tariffs will drive up construction materials prices and make it challenging to meet the increased demand for domestically made components on all public and privately funded projects.

“Our nation’s construction industry derives about 25% of its steel from non-domestic sources, and the specialised iron and steel products used in underground utility projects are essential to its efficient completion. And roughly half of America’s aluminium comes from foreign sources – it will take significant time for domestic supply to catch up to demand.”

Morningstar noted this dilemma, as well, particularly for scheme in planning or preconstruction.

“Participants may want to re-evaluate their supply chain strategies and seek alternative local solutions for major construction inputs and potentially collaborate with contractual counterparties to revise relevant risk allocations,” the credit rater said.

Advice for construction in various stages of project planning

Steel billets stacked to load from a ship in a port. (Image: Adobe Stock)

Morningstar offered some guidance for other companies at various points on a project timeline.

“For projects that have not yet reached financial close, the negotiation process may be delayed as contractors will be driven to adjust the contract price or certain contractual terms to neutralize the impact of the tariffs.

“For projects that have reached financial close based on a fixed-price or guaranteed maximum price contract, contractors may suffer painful losses during construction unless the existing contracts allow them to pass along incremental customs duties to contract counterparties in a timely fashion.

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“Alternatively, a contractor may attempt to wait out the disruption (if deemed temporary) through the re-sequencing of construction activities, which may nevertheless cause delays in construction completion.

“For projects at an early stage of construction under cost-plus contracts, the cost increase may compel developers to reassess the economic viability of these projects.”

Kassalen mirrored those suggestions, overall encouraging businesses to be nimble. 

“It’s possible, in the short term, there could be a run on raw materials if a significant number of builders and developers try to stock up on these materials. We may also see contractors renegotiating contracts or delaying project starts,” he said. “The good news is that there is a supply of raw materials out there. If you’ve already broken ground and your project is already started, you are probably not as impacted.

“For construction projects that are further out that is where the impacts could be felt. The impacts are disruptive, affecting both the builder and end-users.”

Additional information and data on imported US steel and aluminium

The US relies heavily on imported aluminium: about 80% is brought in from foreign sources compared to its domestic production. Canada’s share of U.S. aluminium imports, alone, stands at a significant 70%.

For steel, the figure is 25%. The largest exporters of steel to the US are Canada, Brazil, and Mexico. According to Reuters, Canada and Mexico account for almost 40% of US steel imports.

According to a PwC (PricewaterhouseCoopers) analysis, the US is the world’s second-largest infrastructure market, with annual infrastructure investment expected to top US$1 trillion this year.

“Significant investments are expected in the power generation, oil and gas, and transportation sectors, all requiring large quantities of continuous metal supplies,” added Morningstar. “As a result of these tariffs, many capital projects under development in the US will unavoidably face immediate cost pressures in sourcing relevant construction inputs, potentially causing delays or even failures to complete.”

Some organisations see Trump’s steel/aluminium tariffs as a positive

Philip Bell, Steel Manufacturers Association

The sentiment was not entirely negative, however. The US-based Steel Manufacturers Association (SMA) said it would “welcome” tariffs on steel imports.

SMA president Philip Bell said, “The Steel Manufacturers Association applauds President Trump… imposing a 25% tariff on all steel imports.

“The steel industry in America faces serious threats from foreign actors that seek to destroy domestic production. China and other countries routinely violate trade laws and dump heavily subsidised steel products into the United States at the expense of American workers.

“By imposing a 25% tariff on steel imports, President Trump is levelling the playing field for American manufacturers and workers and helping America defeat direct threats to our jobs.

“Tariffs are a powerful tool to fight against unfair trade and state-sponsored overcapacity around the world and compel other nations to take a serious approach to fair trade.

“Today’s actions are a critical component of the president’s plan to restore American manufacturing and strengthen our national security. Embracing pro-growth tax policies, fighting unfair trade and comprehensive regulatory reform will fuel an economic renaissance.

“This decisive action sends a clear message to the world: the United States will not tolerate unfair trade practices that harm American workers and industries.”

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