Tariff fallout hits contractor confidence

Dive Brief:

• Backlog improved but contractor confidence still dropped in March as tariff-related impacts dampened some bullishness, according to an Associated Builders and Contractors survey conducted from March 20 to April 6.
• Around 80% of contractors said suppliers notified them of tariff-related materials price increases, while 20% had projects paused or interrupted because of tariffs during March.
• Fewer than 26% of contractors expect profits to grow over the next six months, and more than 40% anticipate a decline, according to the report. Still, backlog jumped to 8.5 months during the month, up 0.2 months from February.

Dive Insight:

The increase in March’s backlog offers a snapshot of contractor activity and sentiment before the latest round of tariffs took effect, said Anirban Basu, ABC chief economist.

“Backlog increased in March and contractors remained optimistic regarding the future, but this largely reflects contractor activity and sentiment prior to April 2, when the most consequential economic policy in several decades was announced,” said Basu.

Although hiring expectations improved in the latest survey, concerns about profit margins and sales expectations have intensified. That’s particularly true for respondents who completed the survey after the tariff announcement, according to ABC.

Despite these concerns, builders across all nonresidential subsegments still tacked on projects to backlogs in March. That said, infrastructure remains the only category with significant year-over-year gains, according to ABC.

Basu said ripple effects from tariffs have surfaced in the construction pipeline outlook.

“These tariffs have already materially diminished the outlook for construction activity in 2025,” said Basu. “Many businesses are poised to delay or even cancel planned capital investments given the current business environment and daily market convulsions.”

Although activity has not yet fully slowed, Basu cautioned “conditions will likely deteriorate further if elevated tariff rates remain in place for any meaningful length of time.”