‘Projects will cost more’: building in Trump’s America

Steer sums up the mood starkly: “No one is sure where we’re going or what’s going to be happening in the foreseeable future.

“Donald Trump has changed the concept of the tariffs back and forth two or three times since April. He’s changed his position on the war in Ukraine 180 degrees. He’s attempting to get rid of a lot of the construction labour force, and contractors are already reporting difficulties in hiring staff, which means labour will become more expensive.

“A lot of the work coming out of the US is infrastructure projects, which are very big-budget events that go on for a long time – and, if their costs go up significantly, that does call into question their viability.”

Steer says data centres are going up everywhere and the defence sector is starting to hum, but that isn’t enough to keep a major economy going.

“Commercial projects are being delayed because nobody knows what’s going to happen,” he says. “Interest rates are stubbornly high, which means projects will cost more, if they even happen.

“The trouble is, your two main costs, labour and materials, which tariffs could affect, are not under control at the moment.”

“Trump is targeting steel but while America produces lots of it, it’s not necessarily the specialist kind made in Germany or the UK. That’s fine if you’re just throwing up steel beams and columns, but if you’re trying to build high-tech buildings or architectural masterpieces, you need well honed and worked steel and that will push the price up.”

Steer adds: “We know construction is cyclical. What we don’t know is whether we’re near the bottom of this cycle or if there’s farther to go before the situation rationalises and a new playing field emerges. A major economy like the US can’t just stop building things, and much of its infrastructure is 70 or more years old.

“However, it could be several months before we have clarity.”

‘You just can’t get on with stuff’

For Chris Soffe, the outlook is only “storm clouds and headwinds”.

“We just don’t know what effect tariffs will have on inflation in three, six or nine months’ time because none of these percentages are settled, although some isolated countries like the UK seem to have done some sort of a deal, but otherwise they’re all over the map,” he says.

“It’s making it very difficult for businesses to plan. Inflation’s running at 4-6%, which is lower than during the pandemic, but not the 2-3% which is more manageable. Private equity is sitting on the fence. Big corporations are in a holding pattern. I read that architecture and engineering billings are down for the third quarter in a row, which doesn’t bode well for the next year or two.

“I see the entire situation right now as a forward-planning impediment. You just can’t get on with stuff.”

Most sectors are affected in one way or another, Soffe says. Commercial is taking the brunt. Residential is flat in part thanks to interest rates. All sectors face rising labour costs as the Trump administration adds the fear factor to an existing skills shortage through raids on construction sites and other sectors of the economy by ICE.

Projects are getting cancelled in higher education, too, as the administration withdraws research funding or, in the case of some Ivy League universities, launches what looks to be outright hostile political manipulation. Even infrastructure, considered a buoyant sector, could face project cancellations if labour shortages and tariff-fuelled inflation pushes costs over budgets, Soffe says.

“Then you’ve got existing fixed-price contracts in any sector, which are under threat because you’re paying more for steel, aluminium, lumber and other imports, so all the contractors are wrestling with rates on labour and materials,” Soffe says. “It’s a strange situation for the US market, which is normally buoyant.”

Soffe says he has to go back to the UK in the 1970s – with strikes, the three-day week, OPEC threats and high inflation – to find a period comparably volatile in his career.

“That’s why we had inflation-linked contracts back then, because there was no way contractors could shoulder inflation running at 15-18%. Whether it will settle down or not, I don’t know. It could, but certainly the first six months of this administration have been very volatile indeed.”

His advice to construction companies?

“Service existing clients with care, and pick sectors that tend to not go away,” Soffe says. “The early 1990s was a very slow period, and we did a lot of work in prisons and churches. They tend to stay around whatever’s happening!”