Almost universally, a Republican administration is seen as a positive for U.S. construction. But will it be this time? The signals from the President Elect can be puzzling. Here are some of the realities facing the construction sector.

Legislation – Con

On September 5^th of this year, President-elect Donald Trump pledged to “rescind all unspent funds under the Inflation Reduction Act”. In addition, Trump has also said that he would seek to restore presidential authority to withhold congressionally approved spending that he considers wasteful.

During President Biden’s tenure, there were three major bills passed by Congress: The Inflation Reduction Act, The Infrastructure Investment and Jobs Act, and The Chips & Science Act, all contain vast amounts of funding. However, regardless of the funding prescribed by Congress, much of the funding “has not hit the street yet!”  (The U.S. D.O.T. has estimated that only $480 billion of the estimated $1.2 Trillion funded for IIJA has been allocated!)

Many in the construction industry are concerned about whether the President-elect will “Claw Back” unspent funding from these three Acts. Although not all the funding has been allocated, major U.S. construction companies, and their suppliers, are hoping that the President-elect does not touch the infrastructure funding.

Labor Supply – Con

One of the President-elect’s most controversial policies is the planned deportation of undocumented migrants. According to the Pew Research Center, the construction sector employs an estimated 1.5 million undocumented workers, or 13% of its total workforce!

Should such a large number be removed from a sector already facing a labor crisis, it is expected to have a profound impact on construction times and costs.  Amid the skilled labor shortage that has been plaguing the construction industry, the removal of undocumented workers might affect the contractor’s ability to staff new work.

Tariffs – Con

A major initiative of the 1^st Trump presidency was the “America First” economic policy, shifting away from multilateral free trade agreements to bilateral trade agreements, as well as the implementation of tariffs to almost every country importing goods into the U.S.

The President-elect has now suggested proposed tariffs in excess of 60% on Chinese goods and 100% on products from Mexico, as well as ending China’s “most favored nation” trading status.

From past experience, Trump was especially hard on imports of steel and aluminum. It is feared that such tariffs will only benefit the U.S. steel and aluminum manufacturers, not the downstream users of steel – especially manufacturers and constructors – who will eventually pay a premium for that vital product, thus adding to the cost of the project.

Larger firms, for the most part, have more wiggle room within their margins to swallow some of the extra costs; smaller firms may not. As the majority of U.S. manufacturers and constructors are considered small businesses, the potential for downstream impact on them is great.

Tax Cuts – Pro

On Jan. 1, 2018, then President Donald Trump, signed into law the “Tax Cuts and Jobs Act (TCJA)” which was a major overhaul of the tax code. The chief implication with regards to the construction industry came from a novel flat tax rate (21%) compared to a tiered rate that ranged from 15% to 39%, depending upon the amount of a firm’s taxable income.

Whereas portions of the law are expected to expire for individuals next year, the corporate tax cuts are permanent until amended by law. Any further tax cuts will certainly provide “tax certainty and fairness” for the small construction business.

Deregulation – Pro

In addition to tax changes, a second Trump term could see further industry deregulation. Early in Biden’s presidency, Trump’s Executive Order 13771- which mandated that any executive department or agency remove two regulations if it wished to implement a new one – was rescinded. In Trump’s 2^nd administration, it is likely that the same Executive Order or a similar one will be enacted.

As U.S. construction firms – in most every market – face excessive regulations and backlogged permits, there is hope that the new Department of Government Efficiency, headed by Elon Musk and Vivek Ramaswamy, will cut bureaucracy and streamline regulatory processes.

Infrastructure – Pro

In October of this year, Trump revealed his $1 Trillion infrastructure plan. His infrastructure differs from most current funding plans as Trump’s plan would be largely funded through private investment. Tax credits would go to investors willing to put up an equity stake in revenue generating projects such as toll roads, airports and utilities.

According to the President-elect:

“I want to build the next generation of roads, bridges, railways, tunnels, seaports and airports.”

Brian P. McGuire, President & CEO of Associated Equipment and Distributors, summed up the future very well in his congratulatory note to President-elect Trump:

“Our country stands at a crossroads where bipartisan cooperation is not just necessary, it is essential. We must rise above gridlock and inaction. Together, Republicans and Democrats have the responsibility to maintain a tax code that fosters growth, to invest in our infrastructure and rural communities, and maintaining and nurturing the next generation of skilled workers who will shape our future.