Construction Costs Rising as Trade War Continues, but County Avoids Agricultural Impact

Posted

While the consequences of President Donald Trump’s trade war have already been felt by cherry and wheat growers in other regions of the state, Southwest Washington has not been immune from rising building costs as a result of ongoing and threatened tariffs.

“Any bids that included metal, aluminum, windows, reinforcing steel, the pile, those are obviously something that has a lot of raw material,” said Keith Michel, senior project manager with Olympia-based FORMA Construction. “We saw some significant increases in prices there.”

FORMA holds the construction manager/general contractor contract for two elementary schools being built in Centralia, which have jumped $2.2 million over the original budget thanks in part due to rising material prices. Michel said he could not estimate how much of the additional cost was due to the tariffs.

The construction industry is one of many affected by tariffs imposed by President Trump on a variety of imports this year, as well as retaliatory tariffs by trading partners aimed at U.S. exports. Washington stands to lose $480 million in agricultural exports to China, according to the state Department of Agriculture, much of that the cherry and wheat crops in other regions of the state.

According to  Robert Hamilton, the Governor’s Advisor for Trade Policy, retaliatory tariffs imposed by trading partners have been placed on products that accounted for $1.8 billion in Washington exports last year, with pending tariffs aimed at another $2.4 billion.

The 25 percent tariff imposed by Trump on steel imports, along with 10 percent on aluminum, has been the biggest driver of increased construction costs nationwide.

“That adds costs to any downstream industry,” Hamilton said. “You’d see increases and costs to any industry that uses steel and aluminum.”

Lewis County has had to face rising estimates for its municipal Vader-Enchanted Valley Water System reservoir. The project, which is for a 250,000-gallon, welded steel water reservoir, has nearly doubled from its $750,000 original estimate, according to county manager Erik Martin.

“Construction costs are going up,” he said. “We heard from the contractors that the price of steel has gone up.”



He noted that cost estimates had been rising before the tariffs took effect, and it’s impossible to pinpoint how much of the increased cost is a result of the tariffs. T Bailey, Inc. is the county’s contractor for the water tank, and the company acknowledged the tariffs have caused challenges.

“The prices all did go up in anticipation of (tariffs),” said Justin Rawls, the company’s vice president and director of operations. “We don't have a clear picture of how much of that was supplier speculation and how much of that was direct. ... It's certainly increasing the cost of projects, and it’s increasing the timeline. We're waiting three to four months for steel. That's double what we used to wait.”

Meanwhile, U.S. tariffs have targeted many wood products imported from China; China has responded with tariffs of its own on U.S. wood products. Spokespersons from Port Blakely Tree Farms and Sierra Pacific said their part of the lumber industry has not been affected, since their business is primarily domestic.

However, Chehalis-based Alta Forest Products has been an outspoken supporter of proposed U.S. tariffs targeting Chinese fence pickets, which is Alta’s main product. According to Alta president and CEO Mike Pederson, the Chinese products are erroneously labeled as cedar, although they’re closer to fir, and they’re not kiln-dried as they’re supposed to be.

As a result of increasing Chinese market share, Alta has had to close a shift at one of its plants. The company employs 450 works at four plants, including 120 in Morton. According to Pederson, there are proposals to impose tariffs of either 10 or 25 percent on the fence pickets.

“What we would see is the return of jobs here in Washington State,” he said. “It’s a direct loss to us from that.”

Meanwhile, a tariff imposed by Mexico on U.S.-grown blueberries hasn’t affected the bottom line at Pan American Berry Growers in Mossyrock, according to a company spokeswoman. In general, Lewis County’s agriculture industry has not been as hard-hit as others in the state, simply because it has fewer exporters.

“I think a lot of our producers are smaller producers, so we have a lot of local marketers,” said Lewis County Farm Bureau President Ryan Ells. “Direct farm marketing, restaurants, individual consumers — our county’s not going to be hit as hard. … Nobody has come to me with a direct concern where we need to take action.”