California’s building industry is warning of short-term pricing disruptions to construction materials should the Trump administration move ahead with proposed 25% tariffs on Canada and Mexico starting Feb. 1.
Anaheim-based Ganahl Lumber Co., the oldest lumberyard in California, is one of a host of companies growing skittish over the possible tariffs, which would affect projects that need everything from lumber and structural steel for commercial offices, hospitals, government buildings, and roof and flooring trusses for new homes.
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“I think tariffs would potentially be a negative impact on our industry,” said Pete Meichtry, Ganahl’s vice president of purchasing. “The tariffs may put a little bit of a damper on demand, just because the consumer, or developers and builders, are not in a position to absorb that much, so they would postpone projects or scale them down, or do something to offset that increase.”
While President Donald Trump’s move to impose tariffs would immediately raise the price of imported building materials, his administration argues the tariffs — also called duties — would level the playing field by boosting American production.
“We don’t want to be alarmist, because we don’t see pen to paper quite yet, but we are advising our clients that there could be challenges with tariffs, so let’s wait and see what they are,” said Chris Fisher, managing principal at Troy, Michigan-based consulting group Ducker Carlisle. The firm is advising construction contractors, homebuilders and manufacturers and building product distributors in California. “We also are telling them to be smart and look for alternative materials.”
Ganahl and other building executives also worry the tariffs will be passed along to consumers — which will be especially tough to stomach in Los Angeles County where communities are beginning to weigh rebuilding after devastating wildfires.
“Combine tariffs with the fires, and this will add substantial costs to our ability to rebuild. That’s just disappointing,” said Don Dunmoyer, president of the California Building Industry Association in Sacramento.
In a worst-case scenario, Dunmoyer estimated the tariffs could add $35,000-$45,000 to a home build.
Meichtry, whose company imports about 20% of its lumber from Canada, said that short-term effects of the tariffs would be negative. “It would be a kind of shock to the system, and people would have to regroup and figure out what the strategy is going forward,” he said.
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Ganahl’s remaining wood products come from Northern California, Oregon and Washington, with plywood and panel products shipped from Texas and Louisiana, he said.
“We’re paying attention,” he said of his company, which employs about 1,100 and generated $792 million in revenue last year.
Mock tariff exercise
Turner Construction Co., the largest U.S. general contractor in the United States with more than $23 billion in construction contracts, began reviewing the tariffs issue even before the November election as a what-if-Trump’s-elected exercise.
A Turner executive in the Bay Area said that more than 350 procurement workers with the company, owned by German-based Hochtief AG, began testing ways to relieve the sticker shock on structural steel prices by considering alternatives around imported duties on its current mix of foreign suppliers.
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“Those folks have been studying the potential impact of tariffs for quite some time, well before the election, and obviously in greater detail since the election,” said Steve Rule, vice president and project director with Turner. “We are trying to listen and understand it, and we were able to actually look at alternative supplies for maybe the same piece of equipment or the same material.”
Rule explained that the team developed a simulated building with an estimated $100 million price tag, with half of the project’s cost tied up in material — like structural steel and finishes – with the remainder going to labor and overhead costs.
“That’s our goal, to minimize the impact of tariffs,” Rule said. “Projects will get shelved if it’s a significant issue.”
With 30%-40% of the $50 million in material costs sourced from overseas, the Turner team applied potential tariffs that ranged from 10% to 30%, he explained. “That’s the sort of thing that a developer may look at and say, ‘Well, I can’t go forward with the project if the cost is going to be $101 million, or $103 million, instead of $100 million.’ ”
Some of Turner Construction’s recent Orange County projects have included the three-story Women’s Health Pavilion across from MemorialCare Saddleback Medical Center in Laguna Hills; the Johnson & Johnson Irvine campus; California’s Department of General Services Southern Region Emergency Operations Center in Costa Mesa; and safety upgrades to McCarthy Hall on the campus of California State University, Fullerton.
Like Turner Construction, Ganahl’s Meichtry said that his company’s senior-level executives began discussing the tariffs before last November’s election.
“We think we can weather it pretty good. But I think in the short-term with our customer base, it would be a little shock to the system,” he said. “If Canada’s paying 25% more, I can guarantee you that domestic producers are going to raise their prices. This is our concern. There’s no escape from this, because if those tariffs go into effect, we’re all going to pay more.”
Not all bad
As dire as the tariffs sound in the building industry, Rosamond-based Entrussed, which builds wooden trusses for single-family homes and apartments at manufacturing facilities in Northern and Southern California, is cautious over Trump’s threats on the matter.
Dale Ebberts, a managing member of Entrussed, said that lumber deliveries from sawmills in Northern California and Oregon provide the best pricing — probably due to lower shipping costs and tariffs already imposed on Canadian lumber during the first Trump administration in 2017 and again last year in the waning months of the Biden presidency.
“I don’t really like the idea of tariffs, but I don’t think it’s going to affect us,” Ebberts said.
Ebberts cautioned, however, that he is concerned about truss connector plates, also known as gang plates or nail plates, getting hit with tariffs.
“They are manufactured in Texas, but I don’t know where they get their steel from, so it’s possible that tariffs would affect us,” Ebberts said.
Bad timing
Peter Tateishi, chief executive officer of the California chapter of the Associated General Contractors in Sacramento, said the “tariff conversation is a real one” for his members who build roads, bridges, hospitals, apartments and commercial office buildings.
“It definitely impacted us the last time tariffs went into effect, and it absolutely can impact us again in our ability to make those recovery dollars needed in crisis go further,” said Tateishi, pointing to the rebuild of more than 16,000 homes, businesses and other structures destroyed by fires this month in Pacific Palisades and Altadena.
“If we’re in a position where the cost of goods and materials is going up, it becomes harder to make sure that we can meet all the needs and demands of the rebuilding cycles,” Tateishi warned.