The Associated General Contractors of America (AGC) has reported a 0.2 percent increase in the producer price index for materials and services used in nonresidential construction for June, with a year-over-year rise of 2.3 percent, marking the largest annual increase since February 2023. AGC warns that upcoming tariff hikes set to begin on August 1 could further elevate construction costs and potentially dampen demand.
Ken Simonson, AGC's chief economist, stated, "The fact that construction materials prices are rising even before the steepest proposed tariffs have taken effect doesn’t bode well for what will happen in August if the promised new tariffs are implemented." He highlighted concerns about rising costs leading some project owners to delay or cancel projects.
On June 4, tariffs on steel and aluminum increased from 25 percent to 50 percent. President Trump plans a similar tariff hike on copper starting August 1 and has indicated possible higher tariffs on other essential construction imports.
Significant increases were noted in key construction inputs: aluminum mill shapes rose by 6.3 percent, steel mill products by 5.1 percent, and lumber and wood products by 4.8 percent over the past year. More extreme rises were seen in specific steel categories such as fabricated structural metal for bridges at 22.5 percent and bar joists and rebar at 8.3 percent.
AGC officials expressed concern that these tariff impacts might negate advantages from recent legislative measures like the One Big Beautiful Bill Act, which offers tax certainty and financial incentives aimed at modernizing equipment and investing in innovation.
Jeffrey Shoaf, CEO of AGC, remarked on potential benefits from streamlined permitting processes but emphasized the need for stability in material prices to maximize economic gains from new tax policies: “Finding a way to provide greater certainty on materials prices is the best way to make sure the new tax and regulatory approach have the best possible impact on economic activity.”