Industry News

Tariffs Threaten Construction Demand: AGC

Feb. 4, 2025

Construction spending is up, but tariffs could fuel inflation.

Despite an increase in total construction spending in December, officials at the Associated General Contractors of America warn that tariffs could fuel inflation and temper demand for new construction.

“Despite declines in a few segments, construction demand remains relatively strong,” said Jeffrey Shoaf, CEO, in a statement. “But increasing the cost of a range of construction materials will prompt contractors to raise bid prices, potentially undermining future demand for projects.”

The recently released AGC of America/Sage 2025 Construction Hiring & Business Outlook revealed that potential tariffs and their impacts on materials prices were among construction firms’ top four concerns in 2025. Any tariffs that are ultimately put in place with trading partners, including Mexico and Canada, are likely to increase the costs of construction and harm construction employers who are forced to absorb cost increases because they are locked in contracts, sometimes that were signed several years ago, according to the association.

“We are working with the Trump administration to explain the negative impacts of inflation has had on our industry, particularly these few years,” Shoaf said. “Hopefully the administration will be able to rapidly resolve the underlying concerns driving the new tariffs so our members can help build an even stronger economy.”

Highway construction spending down from 2023

Spending totaled $2.19 trillion at a seasonally adjusted annual rate in December, according to AGC analysis. Spending was up 0.5% from the upwardly revised November rate and 4.3% above the December 2023 level.

Public construction spending fell 0.5% for the month and rose 4.3% over 12 months. Among the three largest segments, highway and street construction rose 0.7% in December but fell 5.0% year-over-year, education construction fell 0.6% for the month but rose 5.8% year-over-year, and transportation spending declined 1.3% in December but increased 3.0% from a year earlier.

Private residential spending rose 1.5% for the month and rose 6.0% from December 2023. Single-family homebuilding rose 1.0% from November but slipped 0.8% year-over-year. Spending by homeowners on additions and renovations rose 2.6% for the month and 21.9% year-over-year. But multifamily construction fell 0.3% in December and 10.5% from a year earlier.

Private nonresidential spending was up 0.1% from November and up 2.3% year-over-year. Spending on data centers, which the Census Bureau includes in office construction, jumped 0.9% for the month and 44.5% from a year earlier. Private office construction other than data centers grew 1.2% in December and 12.8% year-over-year.

About the Author

Rod Sutton

Sutton has served as the editorial lead of Construction Equipment magazine and ConstructionEquipment.com since 2001.

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