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The Trump administration is taking an ax to construction equipment levies in hopes of boosting national industrial investment.
Starting June 8, import taxes on certain equipment derived from aluminum, steel and copper, such as forklifts and residential HVAC systems, will drop to 15%. Those products had been at a 25% rate.
The changes will last until the end of next year, according to a Monday proclamation by President Donald Trump. Foreign companies using equipment made up of at least 85% U.S. aluminum or steel could qualify for an even lower rate of 10%.
Construction price hikes driven by the closure of the Strait of Hormuz as a result of the war in Iran have put a strain on real estate development. Steel mill and industrial controls equipment costs rose 3.8% in April alone. Softwood lumber and hot rolled steel bar prices have jumped 4.1%.
The White House said the temporary change is intended to boost industrial investment.
“American farmers use agricultural equipment to produce the food upon which our Nation relies; construction equipment is essential for the continued reindustrialization of our Nation; and material-handling equipment enables industrial logistics and factory operations,” the proclamation says.
Private investment for nonresidential buildings, including manufacturing plants, fell 0.2% in April. Investment instead is moving toward residential construction, which was up 0.8% in April, following a 0.6% boost in March.
Buoyed almost entirely by residential activity, construction spending exceeded economists' expectations in April. Overall spending rose 0.4% that month, double the 0.2% forecast and a 0.9% increase year-over-year.
Prices for materials have gone up 6.2% since January and are 7% higher year-over-year.
Spending in the private nonresidential space continued to drop in April, marking a seven-month trend, according to Associated Builders and Contractors. The only saving grace for nonresidential spending has been a rise in public projects.
This isn't the first tariff cut of its kind this year. Import tariffs on some goods mostly made up of aluminum, steel or copper were lowered to 25% in April. The cuts weren’t across the board, though, as other imports with the same materials still have a 50% levy tacked on.
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