Tariffs drive construction costs higher, as LI firms try to cope

For companies getting ready to start construction projects, things are getting more expensive. 

The producer price index (PPI) for materials and services used in nonresidential construction rose 0.5 percent in July and 2.6 percent from July 2024, the largest 12-month increase since Feb. 2023, according to an analysis by the Associated General Contractors of America of government data released Thursday. 

Though the AGCA reports on the national construction landscape, higher material costs have had an impact for companies here on Long Island as well. 

Alex Lipsky, president of Bayport-based Lipsky Construction, said the industry has been anticipating the tariffs and prices rose in advance. 

“We’re feeling it today, but it’s been coming,” Lipsky told LIBN. “They increased it over time over the past year, but it is impacting. We found out from a developer yesterday that they’re canceling their project, which is in response.” 

Lipsky added that while prices are up, his company’s margins aren’t. To cope with the uncertainty caused by an erratic tariff policy, the firm is also seeking domestic alternatives. 

“It’s going to be a little bit cheaper,” he said, “but that price is stable and we don’t have to worry about where that price is going.” 

For some firms, a recent slowdown in construction demand is helping to offset the higher costs of materials. 

Anthony Vero, president of Ronkonkoma-based Aurora Contractors, acknowledged that there have been a lot of challenges and uncertainty this year including an increase in material costs due to tariffs. 

“With our purchasing power in excess of $350 million annually, and the current slowdown in construction activity, we’ve been able to leverage competitive pricing to offset the impact of tariffs,” Vero said. “That combination has allowed us to maintain budget discipline and continue delivering value despite broader market volatility.” 

Three major construction materials contributed to the acceleration in year-over-year costs, according to an AGCA statement. The PPI for aluminum mill products jumped 7.4 percent last month and 13.7 percent from July 2024. The index for steel mill products climbed by 8.8 percent over 12 months and the index for copper and brass mill shapes rose 5.7 percent for the month and 6.9 percent year-over-year. 

Tariffs on steel and aluminum soared to 50 percent on July 4, doubling from the 25 percent rate that took effect on March 12, while a 50 percent tariff on raw copper took effect on August 1. In addition, tariffs on most imports from almost all the nations that supply vital construction materials took effect in early August, making further increases in construction costs likely over the next few months, the AGCA predicts. 

“Steep tariff increases earlier this year on aluminum and steel, along with a more recent tariff on raw copper, drove the producer price index for construction inputs higher for the third-straight month,” Ken Simonson, the association’s chief economist, said in the statement. “Even though contractors do not generally import materials directly, it is clear that domestic producers are raising prices in line with the protection tariffs are providing them.” 

Devin Kulka, CEO of Hauppauge-based Kulka Group, said his firm has seen increases in non-domestic steel prices.  

“So far, these increases have been partially offset by international suppliers absorbing some of the tariff costs, based on their belief that the situation is temporary,” Kulka said. “The concern is, if suppliers begin to view these tariffs as long-term, they may stop absorbing those costs, potentially leading to even higher prices.”