Are Tariffs Increasing Prices for the Construction Industry?

Posted by Pasindu Gamarachchi on Oct 16, 2019 4:35:50 PM
Pasindu Gamarachchi

How will round after round of new tariffs impact the construction industry? Should contractors be concerned?

Photo of building under construction that is using imported steel from China.

Many contractors are worried that pricing pressure from tariffs will torpedo the construction industry.

If you listen to the mainstream media, you will hear much of how the "trade war" between China and the United States continues to heat up. Volleys of tariff increases have impacted almost every type of import and export between the trading partners. Takeoffs.io is monitoring construction material prices to determine what the impact of these tariffs may be for the construction industry. Front line data such as this can help you manage the materials pricing expectations for your next construction project. Here are the latest findings. 

The most recent tariffs are part of a list called List 4A and went into effect on September 1st, affecting over $112 billion of targeted products from China. The 15% tariffs will primarily affect consumer goods, including electronics, clothing and shoes. China, in response, has imposed tariffs on some of the US goods on its $75 billion target list, including crude oil.

But what does this mean for the US construction industry? Our analysis will help contractors determine how the trade war between US and some of its trading partners may (or may not) impact their business at the grassroots level. Read below for a detailed analysis on recent pricing trends.

Are you pricing your estimates accurately? Register for our free industry pricing updates. Our team of researchers investigate pricing trends and report results. 

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Picture of a sign that points left and right, wondering how tariffs will impact prices?

A hard look at recent pricing developments in the materials marketplace.

Examining the Front Line Data

Takeoffs.io tracks daily material prices on keystone construction materials published on the websites of major home improvement stores. 

We explored the pricing impact of the most recent tariffs by examining the average and median keystone material prices at Home Depot, Lowes and Floor & Decor. Our analysis focuses on a few weeks before and following September 1st when the most recent tariffs went into place. Products tracked included:

  • Ceramic Tiles
  • Porcelain Tiles
  • Lumber
  • Drywall Panels
  • Roofing Panels
  • Roofing Shingles 

To examine the nationwide effect, we looked at pricing from each of the following cities:

  • New York 
  • Boston
  • Chicago
  • Columbus
  • Houston
  • Jacksonville
  • Denver
  • Los Angeles

The Surprising Results

We analyzed the prices of thousands of SKUs on keystone construction materials spread across the US; here are the results.

Our initial findings indicate that the most recent tariffs have created little to no impact on construction material prices. However, it is essential to remember that the September 1st tariffs do not directly impact the items included in this analysis. Moreover, indirect effects on material pricing may take time to reveal themselves in the marketplace. 

Following is an analysis for each of the keystone materials.

Ceramic & Porcelain Tile Analysis

Picture of a graph showing the recent price change of ceramic tiles imported mainly from China.

Picture of a graph showing the recent price change of porcelain tiles imported mainly from China.

China is one of the largest producers of ceramic tiles and a major supplier to the US.

Ceramic tiles were not part of List 4A's goods to be taxed starting September 1st. However the ceramic tile prices were impacted by a secondary action. On September 10th, the US Commerce Department found that imports of ceramic tile from China were unfairly subsidized. In response, the US began imposing preliminary duties ranging from 104% to 222%. US Customs and Border Protection officers have been instructed to collect cash deposits from Chinese importers based on these preliminary rates.

Following are other interesting findings of our analysis of tile imports.

  • As of September 18th, the preliminary duties have not affected the median and mean pricing figures across the eight cities.
  • In 2018, China exported close to 30% of all ceramic tiles used by the US.
  • The data does suggest that Floor & Decor has the lowest mean and median prices for ceramic tiles. However, it is important to note that the price comparisons across the stores might not tell the complete story because all chains do not carry the same products. For example, Lowes carries products from Elida Ceramica and Solistone, which are higher-end products that drove the mean ceramic prices upwards.
  • Porcelain tiles are approximately 40% more expensive than ceramic tiles. Similar to ceramic tiles, porcelain tile prices have remained steady over the last few months. Porcelain tiles are not likely to be affected by the preliminary duties imposed on ceramic imports from China we mentioned above.

Lumber Analysis

Picture of a graph showing the recent price change of lumber.

Tariffs have the potential to impact the lumber industry.

Here are the results of our analysis for recent lumber pricing at major US retailers. 

  • Lumber prices are primarily affected by the US-Canada softwood lumber dispute, which has been ongoing for a few decades.
  • The dispute stems from the claim that the Canadian government unfairly subsidizes the Canadian lumber industry. Most Canadian lumber is harvested on public as opposed to private land, which is not the case for American lumber. In the view of the US, this imbalance represents an unfair advantage for the Canadian lumber industry.
  • Most recently, the US commerce department imposed a 21% tariff on softwood lumber imports from Canada in 2018.
  • There does not appear to be a significant upward movement in the median and mean prices across retailers for lumber.
  • There is variation across store locations, as some stores carry a broader range of lumber products, which push the mean and median prices upwards. 

Drywall Panels

Picture of a graph showing the recent price change of drywall panels.

The primary gypsum suppliers to the US may be able to avoid increasing tariffs as preferred trading partners.

Following is some recent data on price changes for drywall panels.

  • Gypsum is the primary raw material for Drywall. The US imports most of its gypsum from Spain, Mexico and Canada. It is unlikely that tariffs imposed on China will have any secondary effect on drywall panels.
  • Our data confirms no secondary impact; drywall panel prices have remained steady over the last two months. 

Roofing Panels and Shingles

Picture of a graph showing the recent price change of roofing panels.

Picture of a graph showing the recent price change of roofing shingles.

The US imports a majority of its roofing shingles.

  • Roofing panel prices are likely to be affected by tariffs imposed on steel and aluminum. The latest news on steel and aluminum tariffs is that on May 17, the U.S lifted these tariffs on Canada and Mexico.
  • The US imports close to 90% of its roofing shingles from Canada and there have been no tariffs targeting asphalt, a critical raw material for roofing shingles.
  • The data collected over the last two months do not show a change in roofing panel and shingle prices.

Our findings seem pretty clear, but what does it all mean? Continue reading below for a summary of this article.

Are you pricing your estimates accurately? Register for our free industry pricing updates. Our team of researchers investigate pricing trends and report results. 

Stay Up-To-Date

Prices are Stable Now, But What Happens Next?

Retail prices have not changed, but what does that mean? Are price changes coming?

The September 1st tariffs imposed on China and preliminary duties imposed on ceramic tiles from China on September 10th have had no immediate impact on material retail prices. However, home supply chains, Home Depot and Lowes may take more time to respond to the tariffs as new imports work their way through the retail supply chain. 

In addition, more tariffs are expected to be imposed soon, particularly on imports from China. The US is set to increase tariffs from 25% to 30% on $250 billion worth of Chinese imports in mid-October. 

Contractors need to remain vigilant and keep an eye on this situation as new developments occur. We will continue to track material prices from home supply chains and keep you updated on how tariffs may affect your next project. Please join our subscription list for more updates. 

Topics: tariffs, trade war, Material Prices

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