Tariff Turmoil: Construction Industry Faces Uncertain Future

The construction industry, a cornerstone of economic growth and development, is currently grappling with unprecedented uncertainty. The frequent changes in tariff policies and escalating trade tensions have left contractors and owners in a state of flux, making it difficult to predict costs and demand for upcoming projects. This uncertainty has led to a significant decline in private nonresidential investment and homebuilding, with construction spending falling for the third consecutive month in April 2025.

The Associated General Contractors of America (AGC) reported a 0.4% decline in construction spending from March to April 2025, and a 0.5% decrease from April 2024. This marks the first year-over-year decrease since April 2019, signaling a worrying trend for the industry. Ken Simonson, chief economist of the AGC, attributed this decline to the pullback in private nonresidential projects and a sharp drop in homebuilding, exacerbated by the ever-changing announcements about tariffs on key construction inputs and potential retaliatory measures by U.S. trading partners.

The impact of these tariffs is far-reaching. Private nonresidential construction shrank by 0.5% in April, with the year-over-year increase of 1.0% being the smallest since July 2021. Spending on manufacturing plants, private power construction, and commercial construction—including warehouses, retail, and farm projects—all saw declines. Private residential construction also slid by 0.9% for the month and 4.8% from April 2024, with single-family homebuilding and improvements to owner-occupied homes particularly affected.



The uncertainty surrounding tariffs has created a ripple effect, making it difficult for owners and contractors to commit to new projects. The frequent changes in announced tariffs have led to a lack of clarity on project costs, while countermeasures by U.S. trading partners and a drop in foreign visitors have caused owners to postpone or cancel new projects. This has resulted in a decline in private construction, which risks making the nation less competitive and damaging the prospects for economic growth.

The administration's tariff policies have had a significant impact on the construction industry. The 25% tariff on steel and aluminum imports, for example, has led to retaliatory tariffs from countries like Canada, increasing the cost of these materials and affecting the budget and timeline of infrastructure projects. The U.S. imports about 40% of its aluminum and 25% of its steel from Canada, and another 12% of its steel from Mexico, making these tariffs particularly impactful.

The construction industry is not alone in facing these challenges. The broader economic landscape is also feeling the effects of tariff uncertainties. The frequent changes in tariff policies have introduced uncertainties in material costs and supply chain disruptions, making it difficult for businesses to plan for the future. This has led to a decline in investment and a slowdown in economic growth, with the construction industry being one of the hardest hit.

In conclusion, the construction industry is at a critical juncture. The frequent changes in tariff policies and escalating trade tensions have created an environment of uncertainty, making it difficult for contractors and owners to plan for the future. The decline in private nonresidential investment and homebuilding is a worrying trend, and unless there is greater certainty about costs and demand, the industry is likely to continue declining. This will have a significant impact on the broader economy, making it less competitive and damaging the prospects for growth. It is imperative that policymakers address these challenges and provide the industry with the stability it needs to thrive.