Contractors brace for economic impacts

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Businesses and individuals are preparing for more economic turbulence as President Trump continues his on-again/off-again tariff threats, and some forecasters say we’re heading for a recession. It’s tempting to ignore the news and focus on your projects till the storm passes. However Ken Simonson, chief economist for the Associated General Contractors of America (AGC), disagrees. “Don't think you’re going to be immune to these tariff impacts,” he told AGC of New Mexico members recently. To find out why, we asked Simonson what he’s hearing from contractors and seeing in the trend lines.  

What are contractors saying about tariffs?

The nearly constant and extreme changes in tariffs have caused many private owners and public agencies to delay committing to projects until they know the cost and timeline for construction, the cost of their own inputs and how their revenues will be affected. These delays are especially costly for small- and medium-sized contractors, who need steadier cash flow than large firms to cover their labor and fixed costs. Uncertainty over when imported goods will arrive and what tariff rate will apply makes it extremely difficult to price projects.

That’s compounded by how tariffs affect sectors, too, right?

Construction depends more than most industries on imported materials, components and finished goods such as equipment, appliances and furniture. In addition, tariffs and retaliatory actions by U.S. trading partners threaten to be costly for firms in the export chain—growers, food processors, manufacturers, transportation and logistics firms—causing them and their employees to reduce their demand for construction, as well as other purchases.

What other federal moves are you watching?

Deportations pose another threat to contractors. In four states—New Jersey, California, Texas and Maryland—and the District of Columbia, more than half the construction trades workforce was born outside the U.S. One-third of construction craft workers are foreign-born, compared to 18% in the overall workforce. As many as 61% of building construction crafts such as floor, wall, ceiling and roofing workers—the foundation for many small contractors—are, too. Even the rumor that ICE is raiding a nearby workplace has made these workers disappear, whether or not they have legal status to work in the U.S.

Note: To help contractors and others keep up with the latest tariff news, visit the Tariff Resource Center.

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The Level is written by Margot Lester and edited by Bianca Prieto.