WASHINGTON, DC–Last week the Trump Administration announced it plans to raise tariffs on steel by 25% and on aluminum by 10%. Further details are expected to follow within the next several days but the ramifications of this move are already clear: simple economics tell us that the price of both imported and domestic steel and aluminum will increase. For the commercial real estate industry, that means higher construction costs.

Any tariffs on aluminum and, especially, steel are likely to be damaging to construction in multiple ways, Associated General Contractors of America Chief Economist Ken Simonson, tells GlobeSt.com. AGC is waiting to see the details of the tariff rates, duration, and geographical and product extent, he says, but some scenarios are already clear. Rising prices of these metals means that contractors who have already signed a fixed-price contract for a project but not bought metal products will see their profits reduced or entirely eliminated.

That, in turn, will cause public owners, which generally have fixed budgets, to reduce the number or scope of projects they put out to bid, whether schools, highways and bridges or other infrastructure. “Some private projects will be canceled as construction cost increases make them uneconomic,” Simonson says.