Domestic Factory Plans Called Off As Tariffs Drive Up Manufacturing Construction Costs
Plans to build a $300M plastics recycling plant in Erie, Pennsylvania, have been canceled as sweeping new tariffs push up prices for materials and imported machinery, clouding a yearslong push to boost U.S. manufacturing.
International Recycling Group said Thursday it would cancel a factory in the works for four years, partially blaming tariffs that would bring “expectations of substantially higher project development costs than anticipated,” according to CEO Mitch Hecht.
The announcement came a day after President Donald Trump levied a minimum 10% tariff on imports from more than 150 countries, with some nations facing far steeper rates, including a 34% tariff on China.
Stock markets plunged before those tariffs were implemented on Saturday, and manufacturers across the nation warned they would complicate plans for other planned factories, including a $6M factory under development in Kentucky that could see its bill for imported machinery rise by $250K, The Wall Street Journal reported.
The Trump administration has said its tariffs will motivate onshoring and expansion of domestic manufacturing while decreasing reliance on imported products. But surging costs are rattling those with plans in the works.
“We feel like we’re actually contributing to the economy by onshoring manufacturing, and there’s now additional barriers to entry here,” Ben Smith, chief operating officer of Earth Breeze, told the WSJ.
Earth Breeze is building a factory to manufacture its laundry detergent sheets, replacing its Chinese contract manufacturer. That project will continue despite rising costs, and the factory is expected to create more than 200 jobs, the WSJ reported.
Products made from steel and aluminum are likely to see the most price volatility due to tariffs, Steve Stouthamer, executive vice president of project planning for Skanska USA Building, told Construction Dive.
Steel prices have increased as much as 25% since the beginning of January, driving up the cost of constructing buildings with steel-reinforced concrete and steel structures, among other elements. Tariffs of 25% on steel and aluminum imports were implemented March 12, and those levies were highly anticipated.
A Texas factory for IKO North America, a roofing products manufacturer, is paying more for the steel it uses to fabricate metal shingles, the WSJ reported. IKO has four more plants under construction, and those plants will need machinery imported from outside of the country.
“If we’re to be successful, that’s a cost that’s going to be passed on to the consumer,” IKO CEO David Koschitzky said.
Manufacturers are also bracing for the impact on products already assembled in the U.S. since components can come from numerous countries. An industrial chiller produced in the U.S. may utilize motors from Germany, pipes from India, harness and fan coils from Mexico, and wire from China, the WSJ reported.
Trump said Thursday that it could take time to achieve his onshoring goal, estimating projects may take up to two years to complete.
