Steeling Oregon’s Construction Jobs (A Tariff-ically Bad Idea)

by Peter Quince on 2018-03-07 10:46am

March 1, 2018; News flash: “In a hastily arranged meeting with industry executives that stunned many inside the West Wing...against the wishes of Mr. Trump’s pro-trade advisers, [Mr. Trump] said he would impose tariffs of 25 percent on steel and 10 percent on aluminum, effectively placing a tax on every foreign shipment of those metals into the United States.”

Guess which industry uses the most steel. [Hint: it’s us]

As we teeter on the brink of – maybe – a new round of steel and aluminum tariffs jammed through by President Trump over the objections of most of his own party, most Democrats and Independents, and almost all economists, we have to wonder – what has he got against Oregon contractors?

We don’t have it hard enough? After the catastrophic 2007 housing crash, during which housing starts statewide fell from 33,000 to 7,000, construction employment numbers fell off the table, and some Oregon contractors just up and left the industry, never to return. We’re about to get to the point of pulling ourselves out of this dip. Nevertheless, even as Oregon’s population booms (increasing about 20% since 2006), housing starts still haven’t caught up. One Douglas County Oregon builder says he’s struggling to complete projects begun in 2004 and 2005, then abandoned, and restarted in the past two years. As fast as he and others can build new homes and apartments, he says they can’t keep up with the demand.

The biggest problem in Oregon, as it is nationwide, has been the shortage of trained workers, which means labor costs are rising. But so are the prices of materials, showing a 3% increase in 2017. With no steel or aluminum tariffs yet on the horizon, these costs were projected to rise even more quickly in 2018 – and don’t forget, this is an increase on the already higher prices in 2017. Add rising steel prices to a projected 2018 increase in the cost of materials of 3-4%, and where does that take us? There’s only so much elasticity in contract prices. An estimate that won a contract in 2016 that needs to pay for 2018 steel reinforced concrete, steel corner braces, steel beams, and steel, steel, steel! everywhere you look, we’ll be squeezed to keep any profit margin at all. Add labor costs and the difficulty in finding workers and, before you know it, the margin disappears and heads south from there. Can you continue to bid on jobs? Mortgage interest rates are also beginning to rise and could rise more quickly if tariff-driven inflation  force the Fed to raise interest rates. If the price of new homes goes up with higher material and labor costs alongside mortgage rate increases, will demand dry up?

And all to maybe add a few thousand steel mill jobs in Pittsburgh? Isn’t this “steeling” millions from Oregon to pay a pittance to Pittsburgh?

I don’t want to just be the bearer of bad news. There could be a silver lining to the Trump Tariff. Rising steel and aluminum prices means that car companies will need to raise their prices for cars made in the U.S. (but not those made in Mexico) and – as for exporting these more expensive cars made in the U.S., not too likely – so there will undoubtedly be massive job losses in U.S. car and car parts manufacturing plants. Meanwhile, as other countries retaliate by imposing tariffs on OUR stuff (blue jeans, bleu cheese, and bourbon), those companies will need to cut their workforce. All of this will be certain to ripple through the economy, just as the tumbling construction industry will ripple through and hurt every sector from real estate sales to the diner on the corner – more jobs lost, possibly triggering a global depression! You know what that means? More out-of-work workers to fill the construction jobs! If there are any. What with the global depression, rising home prices and all.

Plus – more expensive aluminum cans (we only import ⅓ of our steel but 90% of our aluminum) means that beer will cost more. We’ve all been looking for a reason to cut back! So, lots of silver linings, there.

Will we get through this? Sure. Will it be tough. Maybe, for a little while, we’ll need to be a little more clever and maybe some of us will go broke or just lose out on jobs or be unable to bid on jobs we can’t make money on, anyway. But Oregon construction will recover. Or we’ll all have to move to Pittsburgh.

Or maybe, a few years down the road, we’ll just have to answer the question “Which industry uses the most steel?” Hint – it used to be us.

 

Peter Quince worked in construction as a young man, but has been making his living as a professional writer since 1985, most recently as a contributor with At Your Pace Online, an innovative online education company that offers CCB approved pre-license and continuing education at CCBLicense.com. Other AYPO classes are available for professionals in real estate, insurance, plumbing, electrical, HVAC, and mortgage loan origination, as well as for Water Operators, and tax preparers.