New steel, aluminum tariffs will push construction costs higher

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2 days ago

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New tariffs on foreign steel and aluminum will raise construction costs further, adding to price spikes triggered by an initial 25% tariff on the materials earlier this year, according to a June 3 industry webinar hosted by Skanska USA.
President Donald Trump increased steel and aluminum tariffs from 25% to 50% on Wednesday, doubling down on a strategy that has reshaped construction supply chains since his administration took over. Only the United Kingdom is exempt from the hike until July 9, per the U.S.-U.K. Economic Prosperity Deal.
The move will inflate material costs across a range of commercial building materials, at a time when many projects stand on shaky financial ground, according to panelists.
'We're still digesting the most recent announcement of the steel and aluminum tariffs doubling,' said Rob Cantando, national director of strategic supply chain at Sweden-based developer and builder Skanska. 'We're going to be working with our supply chain partners to assess that impact over the coming weeks.'
In one case study shared by Skanska, the new tariffs could add around $22 million to a $375 million healthcare development. Nearly half of that jump is tied to derivative components that embed steel or aluminum in their assemblies, according to Skanska. Panelists added these cost increases could even jump as high as 8%.
But other categories are showing resistance to price swings, said Cantando. Several manufacturers that announced price hikes earlier in the year, particularly of drywall, lumber and steel studs, have since scaled back further increases.
'Many of those markets that shot up early when the first round of tariffs were announced are giving back some of those gains as these new tariff policy changes are accounted for. In addition, manufacturers and suppliers are taking action to remain competitive,' said Cantando. 'Many of them are shifting sourcing and materials to minimize the impact of tariffs. In some cases, tariffs are being partially absorbed by the supply chain.'
The result is an unpredictable pricing climate. For now, structural steel escalation is hovering around 5% to 8%, but that could rise quickly, said Cantando.
Coil-based steel products, including hollow structural sections and bar grating, have already surged by as much as 50% since January. Midwest aluminum premiums jumped 54% following Trump's announcement last week of the new tariffs, he added.
To stay ahead of volatility, suppliers have been reworking logistics. Kawneer, a Norcross, Georgia-based manufacturer of commercial construction products, has begun rerouting cross-border contracts and adjusting production footprints across North America to avoid tariff exposure, said Sarah Andreasen, director of North American sales at Kawneer.
Kawneer's architectural aluminum product range includes windows, doors, framing systems, curtain wall systems and railings. The firm's products are used on nonresidential buildings such as stadiums, offices, schools, retail and healthcare construction, according to the company.
'For us, it's been all about rediverting our supply chain,' said Andreasen. 'We have had to do a lot of work, set up production capability in different plants so that we can mitigate those types of transactions from tariffs.'
On the steel side, firms such as SteelFab, a Charlotte, North Carolina-based structural steel fabricator, are working directly with owners and general contractors to create bundled purchasing agreements, said Chris Gregory, executive vice president at SteelFab. Gregory recommended locking in pricing across multiple upcoming projects by combining expected orders into a single package.
'Package projects together. Say 'It's not just 1,000 tons we're buying, we'd like 15,000 tons. What kind of deal can you structure for us to lock in price and help us with the schedule?'' said Gregory. 'That has saved a tremendous amount of money this first quarter that goes directly to the owners.'
However, risks still remain, said panelists. In certain cases, tariff impacts won't appear on an invoice at all, said Cantando.
For instance, if the cost of a component rises due to reshuffled sourcing or overseas market constraints, there's rarely a clean paper trail.
'A component costs $100 but because of tariffs, it now costs $150. My supply chain team quickly gets to work to try to find an alternate source. Let's say they find a source that's $125,' said Cantando. 'You can argue that the $25 increase was a result of tariffs. But you're not going to have a document that shows that because there's no tariff that's applied to it.'
Tariffs' impacts are further complicated by shifting domestic capacity. While U.S. steel mills are currently running below peak capability, at around 75%, certain segments have already seen stretched lead times, said Gregory. Aluminum smelting capacity, idled in recent years, will also be harder to ramp back up, said Andreasen.
'I do think it's something that we're going to have to watch pretty carefully,' said Andreasen. 'I think that's a challenge that we'll continue to watch on the horizon.'
In the meantime, executives should continue to develop contingency planning and contract strategies. Panelists during the session advised clients to revisit contracts to help mitigate risk.
'You might want to consider establishing unit pricing, or index-based pricing, for products where the supply chain is suggesting that firm fixed pricing won't reflect future tariff policies,' said Sarah Vakili, senior director of business planning and strategy at Skanska. 'Of course, stay informed and be willing to adapt.'
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