ConDig (12-Jul-18).  Construction costs surged 9.6% on average from June 2017 to June this year as tariffs against foreign goods like steel and aluminum start to take hold, according to the Associated General Contractors of America (AGC).

Based on an analysis of Labor Department data, AGC reported that the rise in June was the sharpest increase in nearly a decade and the rise in costs was now squeezing contractors’ profit margins.

The hike in construction costs comes as President Trump rolled out a 25% tariff on imported steel and a 10% duty on aluminum from Canada, Mexico and the European Union on May 31.

“Contractors’ costs for a wide range of materials and services have escalated dramatically in the past few months, putting a squeeze on profits and dimming the outlook for both public and private projects,” said the AGC’s chief economist, Ken Simonson, noting that the US has also introduced $200 billion in tariffs on Chinese goods.

“Tariffs that took effect or have been announced since this price data was collected will push costs up even more.”

The producer price index jumped by 20% for aluminum mill shapes, 17.4% for copper and brass mill shapes and 12.3% for steel mill products over the past 12 months.

AGC also reported that the price index for new construction – a measure of what contractors are charging to build projects – was up 4.3%.

“Many of these increases far outstripped the 4.3% rise in the price index for new construction – what contractors are charging to build projects, implying that contractors’ profit margins are shrinking as they absorb some of the increased costs,” Simonson said.

Last month, AGC warned that construction costs were set to rise further as tariffs on steel and aluminum are set to take effect.

AGC warned in March that the roll out of US import tariffs on steel and aluminum could result in the loss of 30,000 jobs in the construction industry as contractors will be forced to absorb increased costs.