Local builders are bracing for the impact of additional tariffs on imported metals and lumber. On Monday, President Donald Trump signed an executive order to place 25% import duties on steel and softwood lumber imports. Builders are worried the tariffs will cause uncertainty in the market and ultimately drive up construction costs.
Ron Ciotti, whose firm Hinckley Allen represents developers in Boston and New Hampshire, said large construction projects will feel the immediate impact,
“So much of the steel used in Massachusetts comes from outside the country, specifically Canada. There is a significant amount of steel made domestically, but not enough to sustain the demand locally,” said Ciotti.
A tariff is essentially a tax on an imported good, meaning the importer pays an additional cost for importing the item from another country. According to the National Association of Home Builders , this raises the price of imported products. That additional cost is either absorbed by the importer or passed on to the consumer.
Dr. Christopher Knittel, George P. Schultz Professor of Energy Economics at the MIT Sloan School of Management, said about three quarters of every tariff dollar gets paid by the consumer.
“So if we’re placing a 25% tariff on steel, about three quarters of that will fall on the shoulders of consumers,” Knittel said.
Experts say the policy could also impact domestic steel prices.
“When you place a tariff on an imported good, it’s not just the price of the imports that increase, but it’s also the price of the domestically manufactured products that increase,” Knittel said. “Obviously the cost of importing steel and aluminum will increase, but domestic manufacturers will also raise their price because they can.”
Construction will be the main industry affected by the tariffs, but their impact will also reverberate in other ways.
“Households will see an increase in the price of vehicles and any product that uses aluminum or steel,” Knittel added.
That includes canned food and beverages. Massachusetts Brewers Guild Executive Director Katie Stinchon said the guild’s members are already receiving notices from vendors about price increases due to the steel tariffs. For Massachusetts breweries, aluminum cans are essential — accounting for more than 60% of packaged beer sales — so even small price hikes quickly add up.
“While all breweries will feel the impact, our smallest breweries will be hit hardest. They don’t have the capital or storage space to buy aluminum in bulk at lower prices,” said Stinchon. “They already operate on thin margins and compete against multinational beer corporations that can absorb these cost increases. If these tariffs remain in place, we’ll see higher prices for consumers, tighter budgets for local breweries, and a threat to jobs and the survival of these small businesses.”
Ciotti says his agency is working with clients to ensure that their projects are set up to allow pre-purchasing, and looking for alternative materials not impacted by tariffs.
“But obviously, when you’re talking about pre-purchasing something, there has to be some concerns related to storage costs,” said Ciotti.
Ciotti says there is also concern about country-wide tariffs on imports from China, which is also a major supplier of building materials.
“All of that is going to raise prices on those projects, which is going to make developers look at it and say, 'I’m not sure we can make this work anymore,’” Ciotti explained. “And so you’re going to see projects ... get put on ice. I think it’s going to have a chilling effect on the construction industry for a bit.”
The tariffs are slated to take effect in March, but the White House says negotiations are ongoing.
