Companies Building New Factories Brace for Higher Costs

Yahoo

06-04-2025

Roofing-products manufacturer IKO North America has been on a factory-building spree in the U.S., with one plant completed and four more under construction. After President Trump launched a barrage of tariffs on U.S. trading partners, the math abruptly changed.
Chief Executive David Koschitzky said IKO's just-finished factory in Texas now faces higher prices on the steel it uses to fabricate metal shingles, while the plants that are still being built need machinery that isn't made in the U.S. The company will continue with the projects, he said, but tariffs will make them much more expensive.
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'If we're to be successful, that's a cost that's going to be passed on to the consumer,' Koschitzky said.
Trump's tariff announcement threw a wrench into factory builders' plans—and complicates a yearslong government effort to reinvigorate U.S. manufacturing. Companies are double-checking the numbers on planned factories, or halting them altogether.
Tariff-swollen building costs helped to kill a $300 million plastics recycling plant in Erie, Pa., that had been in the works for four years. International Recycling Group, helmed by CEO Mitch Hecht, said Thursday it was canceling the factory partly because new duties on material and imported machinery had created 'expectations of substantially higher project development costs than anticipated.'
The company said the plant, which had been expected to generate 200 jobs, was also hampered by delays in securing a $182 million loan guarantee the federal government conditionally granted last year.
The past three years have seen an explosion of U.S. factory investment, driven in part by billions of dollars in Biden administration subsidies for manufacturers supporting the semiconductor and electric-vehicle industries as well as renewable-energy projects. Companies have also sought to shorten supply chains that became strained during the Covid-19 pandemic.
The momentum has persisted under Trump. The value of manufacturing-related construction, which hit a record $233 billion last year, continued to rise in the first two months of 2025, according to the U.S. Census Bureau.
Administration officials maintain that persistent trade imbalances with other countries led to the deterioration of domestic manufacturing over recent decades, and that limiting U.S. reliance on imports will boost economic growth.
Trump told reporters Thursday that it might take several years to achieve his goal of on-shoring manufacturing.
'They can build them fast, but they're still very big plants,' he said. 'I'd always say it'd take a year and a half to two years.'
The administration envisions tariffs motivating companies to source more domestically produced goods, supporting an expanded U.S. manufacturing sector. But higher costs for imported materials and components could push up prices at home, industry professionals said.
Earth Breeze, which makes detergent sheets for washing machines, is investing nearly $6 million in a Kentucky factory that will replace its Chinese contract manufacturer and create more than 200 U.S. jobs. Chief Operating Officer Ben Smith said the project will continue even though it now faces escalating costs, including a bill for imported machinery that tariffs could drive up by $250,000.
'We feel like we're actually contributing to the economy by on-shoring manufacturing, and there's now additional barriers to entry here,' he said.
After Trump announced tariffs on steel and aluminum in February, construction firm Skanska estimated that the cost of metal panels, metal studs and structural steel would rise around 20% to 30% over the next year. Plumbing equipment prices could rise as much as 10% and drywall as much as 20%, alongside higher costs for electrical gear such as generators, HVAC equipment, roofing products and insulation. The new tariffs could add to the increases.
Tom Park, who runs Skanska's supply-chain strategy, said that while some products compliant with the U.S.-Mexico-Canada Agreement will be exempt from the latest tariffs, even equipment manufactured in the U.S. often relies on imported parts.
An industrial chiller produced in a U.S. factory might contain wire from China, steel from Canada, pipes from India, harnesses and fan coils from Mexico, motors from Germany, copper from Peru and electronics from Korea—which could be subject to an array of tariffs, according to Skanska.
'These confrontational measures are inflationary across the board,' said José Torres, senior economist at Interactive Brokers. 'It's a risky path. There's a chance we did all this, and we barely gained anything.'
Before Trump's tariff expansion, contractors had been rushing to preorder materials and get ahead of cost increases for building projects, said Kevin Evernham, regional vice president for architecture firm Ware Malcomb.
While it typically takes years to get a new project fully planned and approved, Ware Malcomb has been trying to speed things up. 'That is the new normal…schedules are not finalized, yet we're moving forward,' Evernham said.
Evernham said that the higher costs could price some projects out of existence. For factories looking at a building cost of $100 to $200 a square foot, increasing roofing costs by $5 a square foot can be substantial, he said.
Write to John Keilman at [e-mail] and Owen Tucker-Smith at [e-mail]
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