Tariffs affect local commerce

Construction sees steepest annual rate increase on some goods in nearly 7 years

Steel and lumber tariffs have caused contractors to spend exponentially more on construction materials over the past year.

That’s the observation being made by the Associated General Contractors of America.

Goods such as metals, lumber and plywood and diesel fuel experienced double-digit percentage increases between May 2017 and May 2018, with the collective cost of construction goods rising 8.8 percent.

The annual rate increase is the steepest in nearly seven years, according to the association.

Fuel prices have also been on an unusually steep rise, increasing 29.3 percent from September 2017 to September 2018, according to the association.

Tariffs on steel of 25 percent and aluminum of 10 percent were imposed on most countries in March of this year, which was extended to products from the European Union, Canada and Mexico in early June.

Although material cost continues to increase, an additional 333,000 construction jobs, both residential and non-residential, in Ohio were added between October 2017 and October 2018, a 4.6 percent increase.

In addition, the upcoming year may indicate even more jobs created.

According to a 2018 workforce survey results collected from 64 construction companies from the association, 90 percent of companies expect to be hiring hourly craft personnel for expansion in the next 12 months.

However, 92 percent of companies said that hiring salaried and hourly craft positions have prove difficult over the past year. Local impact

Some local companies have been feeling the effect of the increasing prices of steel, lumber and diesel in both their construction projects and shipments.

For the Second Harvest Food Bank of North Central Ohio in Lorain, funds have had to be rearranged in their budget in order to prepare for the anticipated

increase in diesel prices for next year.

The food bank serves 112 partners in four counties, providing an annual average of 9 million pounds of food.

Second Harvest CEO and president Julie Chase-Morefield said during the holiday season that the food bank will ship between 40,000 to 50,000 pounds of food a day.

“This is a high-need time of year,” she said.

Second Harvest currently uses three box trucks for their deliveries, each able to hold between 10,000 and 12,000 pounds of food each.

Chase-Morefield said the food bank has seen a significant increase in diesel prices over the past year, especially when hurricanes hit Texas and Florida early in the year.

“Last year, the budgeted value was in the neighborhood of $105,000, and that’s just for fuel and shipping costs only, basically anything that’s coming in or out,” she said. “The year’s fuel costs actually came out to $138,000.”

Chase-Morefield said Second Harvest is now looking to improve the value of each dollar spent, including decreasing truck renting and

adding a semi-truck to its shipping fleet to prepare for an estimated 25 percent increase in fuel costs for next year.

Another side of impact from the tariffs that Second Harvest is experiencing is the food bank will be seeing more food coming in from farmers, growers and producers, which will bring in more products with a shorter shelf-life.

“It’s been a logistical challenge for us,” said Chase-Morefield, adding that limited drivers and trucks on the road have been an added difficulty. “There’s a lot of challenges with these tariffs.” Timber

For residential construction companies, everything from the lumber used to build houses to the locks on doors will be impacted by tariffs.

According to the National Association of Home Builders, the futures market saw a significant increase in price per thousand board feet of lumber, jumping from almost $440 in mid November 2017 to almost $640 in May of this year.

“There’s really two contributing factors to lumber going up, typically: demand and hurricanes or storm

events,” said Robert Yost, owner of Yost Construction in Elyria. “Well, along comes the tariff. The tariff is imposed on Canadian lumber, went up 22 percent on the surface.”

Yost said although lumber prices have relaxed, the value of the company’s houses have increased an average of $6,000 to $8,000.

Yost said for every $1,000 increase on the price of a house, there are 100,000 potential buyers eliminated from the pool.

“Believe it or not, it hasn’t made a negative impact on sales,” he said. “What we’re seeing is older adults wanting to downsize and firsttime buyers ... The tariff doesn’t paint as bad a picture as everybody thinks it does because the demand has still been there.”

However, the steel tariff to take affect Jan. 1 poses a different, more serious problem for construction companies. Yost said there are as many as 500 different products in a house made of metal.

“Whether that be a dishwasher, a lock, a hinge, the metal that goes in concrete, the rebar,” he said. “So it’s all the other things that are put into the home. We’ve yet to see the affect of that pricing.”