Construction contractors will not be affected by tariffs in 2018; Developers see profits margins shrink

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Home » JOMAC Blog » Construction contractors will not be affected by tariffs in 2018; Developers see profits margins shrink
Construction contractors will not be affected by tariffs in 2018; Developers see profits margins shrink

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To weigh in on the “hot button” of the moment, the newly imposed steel and aluminum tariffs have many in the industry up in arms as to what the implications will be for business. For general contractors working in commercial and residential construction, the foreseeable future looks bright. There is little to no indication that these trade sanctions will cause ripples in business, as building construction is set to boom going into the summer of 2018. However, there could be a bottom line strangle hold for developers who will be squeezing margins until domestic steel can meet demand.

While there is a certain degree of uncertainty of the long-term implications of these trade sanctions, there will be no immediate affect to general contractors as there is already an alarming labor shortage in both commercial and residential construction, that would make it near impossible for general contractors to be immediately affected by the new tariffs placed on foreign materials.

General construction contractors have highly sought-after skills, and the need for these skills will not be going anywhere. For example, Home Depot recently addressed the glaring shortage of skilled contractors by donating $50 million dollars towards the training of new construction workers. According to the Bureau of Labor Statistics, the US is set to add 200,000+ new construction jobs in 2018, and the amount of skilled labor necessitated is nowhere to be found. With projections for construction spend to be the upwards of 1 trillion dollars this year, one would be hard pressed to think that general contractors will be facing occupational hazards (other than, you know, being on a job site).

There is no doubt that as materials costs see an initial spike due to the imposed trade tariffs, that construction companies and developers will see narrowing margins. However, construction contractors will continue to see a myriad of opportunities due to the labor shortage.

As the demand for skilled contractors continues to rise, the trade tariff implications could lead to more heated negotiations of rates, testing the tenacity of all parties involved. The upper hand will, almost without a doubt, be on the side of the contractor, as the supply and demand dynamic for skilled labor is at a high point. And while the trade tariffs will effect the construction industry, it is not quite time to sound the alarm.

The projected 1 trillion dollars of construction in 2018 will take a hit of $7.5 billion dollars this year. While 7.5 billion dollars is not anything to shrug off, the actual industry will feel a minute 0.0075 % decrease in revenues, with the new projected construction spend in 2018 weighing in at 992.5 billion dollars. Of 7.5 billion dollar hit, most will be absolved by developers and construction companies, with contractors feeling little to no immediate effect. The long term implications of steel and aluminum tariffs are going to be difficult to predict, but for the short-term, general contractors should have very little to worry about other than an extremely busy summer.

For more on industry news, pricing service trucks, comparing costs of aluminum vs. steel, and general service truck knowledge bombs, follow Carlee Leslie or visit our website.

 

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