Tariffs under Trump could increase up to $800bn annually, how can construction prepare?
06 January 2025
Forthcoming tariffs in the US could increase in-country up to US$800 billion annually.
Shipping containers stylised with the US and China flags. (Image: Adobe Stock)
That’s according to panellists from UK-based global professional services and consultancy PwC (PricewaterhouseCoopers) speaking during a roundtable webcast titled “The road ahead: What’s next for the business under a new administration?”.
Late last year, after the results of the US election, President-elect Donald Trump promised to expand tariffs 25% on all goods imported from North American neighbours Canada and Mexico. Trump also voiced support of an overall 10% tariff on imported Chinese goods, though some products under Trump’s tariff plan could increase up to 60%, reports said.
“The impact… could be quite large,” said Brett Cayot, a principal in supply chain consulting for PwC, during the discussion, which took place in mid-December. Initially, Cayot estimated the value could more than $1 trillion annually, though that figure was later amended to $800 billion (excluding duty-reduction processes).
Cayot continued, “What we’re finding is that many companies would actually experience 400%-plus increases in tariffs with larger companies having new tariff bills that actually exceeds several-billions-of-dollars each year.”
In some instances, the monetary value increase of tariffs for companies is larger than their annual profits.
“These realisations are raising a lot of questions, like: How can I change my supply base? Can I move manufacturing? Should I refine my overall supply chain strategy?” added Cayot. “Companies are challenged. They know they need to do something, but they just don’t know what because of the uncertainty and open questions.”
How construction can navigate new Trump tariffs
The PwC roundtable suggested the best action companies can take now before tariffs take effect is in analysis and adjusting (as needed) its supply chain logistics while leveraging new technology.
US President-elect Donald Trump, accompanied by his wife Melania, attends a New Year’s Eve event at Mar-a-Lago in Palm Beach, Florida, US, 31 December, 2024. (Image: REUTERS/Marco Bello)
“In the short term, companies may not be able to shift their supply chain quite fast enough to avoid the rather substantial cost increases and potential disruptions,” said Cayot.
As such, builders and contractors should expect higher material costs and should plan on retooling its “supply chain footprints” and prices where they can.
“We already witnessed this major change in recent years, as evidenced by Mexico becoming the largest trading partner with the US over China,” noted Cayot, who said 2018’s Trump tariffs levied to China led many US companies to move manufacturing out of Asia and into Mexico.
Matt Wood, PwC commercial technology and innovation officer for global and the US, said implementing new technology can also help.
“Now is the time to be investing in your AI [artificial intelligence] strategy,” said Wood. “Focus on your data; the quality of your data, the privacy or your data and the governance of your data.”
On the specifics of tariffs, Cayot added companies can use tech to “get a handle on what your potential impact is and be able to pinpoint down to the highest exposure areas. Then, extend this into a true supply chain digital twin where you can include duties, taxes, perform financial modelling and assess potential various scenarios on your company.
“This is pulling together the end-to-end – sales and marketing, policy, finance, tax – and coming to a creative solution that works.”
Construction can rely on partnerships, mergers, acquisitions to navigate tariffs
Firms should also look inside their own organisation both via strategic partnership and mergers and acquisitions (M&A).
Cayot said, “Double down on investments and network collaboration with strategic supplier partnership and customers.”
After the results of the US Presidential Election, PwC released “Engineering and construction: US Deals 2025 outlook”, which anticipates a flurry of M&A driven by the need for energy infrastructure projects.
PwC deals partner Michelle Ritchie told Construction Briefing, “There’s this sense, as we talk to clients – both sellers and buyers – that we’re ready to go.
“We know today’s landscape, and it’s going to be in place for 12 to 24 months. So companies, they’re really thinking strategically. They’re looking at their budgets and saying, ‘Where are my gaps?’”
Michelle Ritchie (Image: PwC)
This reflection should lead to regular investments and divestments, as 2025 could be a year of considerable shuffling of subsidiaries and affiliates between like-industry firms.
“The M&A outlook for E&C deals in 2025 remains positive as deal activity in the second half of 2024 rebounded from reduced levels earlier in the year,” stated the PwC report, though stopped short of projection what segments outside energy are likely to remain active. “Recent US elections may change the regulatory landscape and drive investment focus toward different infrastructure opportunities.”
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