Donald Trump's tariff threat has Chicago's construction industry bracing for impact
Sandya Dandamudi has her sights set on a big trip in February. As the president of stone contractor GI Stone in West Loop, she's traveling to Brazil where she hopes to scout out new suppliers.
Brazil is one of a handful of countries that American suppliers like GI Stone are eyeing as a potential market once President-elect Donald Trump takes office on Monday. Trump has vowed to implement higher tariffs — a tax on goods imported from other countries — as soon as his first day as president. His proposed tariffs are expected to hit China, a major supplier of stone and other key construction materials, as well as Mexico and Canada.
Business owners like Dandamudi are hoping countries like Brazil will not be targeted as aggressively, but even that's not a guarantee.
GI Stone sources granite, marble and engineered quartz. Its suppliers span the globe, and China is a key source for the company, Dandamudi said.
“We’re not sure what the cost of goods are going to be,” she said. “I'm actually being proactive and looking for countries that I think are going to be tariff-safe.”
If enacted, the tariffs would come at a time when Chicago is expected to see the start of several mega-projects like the United Center’s 1901 Project and the Illinois Quantum and Microelectronics Park in the South Chicago — making the already high project price tags soar even higher. It could also slow down the city's development pipeline.
“Before there was even talk of the tariffs, we've had an issue with not enough cranes in the sky,” said Tom Cuculich, executive director of the trade association Chicagoland Associated General Contractors. “The construction economy in Chicago has been challenging. The pipeline of projects has been down. … It's a challenging market with taxes and political uncertainty and the like.”
Trump tariffs would be a familiar path
Trump spoke about tariffs on the campaign trail, and it's continued to be a talking point for him since Election Day.
In November, he posted on his social media site, Truth Social, that he plans to implement 25% tariffs on Mexican and Canadian goods and an additional 10% on Chinese merchandise to force the countries to stop the flow of drugs and migrants into the United States. During his campaign, he floated tariffs of up to 60% on Chinese goods.
Ken Simonson, Associated General Contractors of America chief economist, said those tariffs could put the homebuilding industry “on the bleeding edge.” Single-family homes, small-scale apartment buildings and condos all use large amounts of Canadian lumber.
Steel, a bedrock of most construction projects, is one of the most vulnerable materials under new tariffs, he said. The price of steel mill products dropped by more than 7% between November 2023 and November 2024, AGC found. Tariffs could push steel prices up again, Simonson warned, along with copper and aluminum prices.
“What we saw when tariffs were put on by Trump before, domestic steel producers raised their prices pretty much in tandem with the amount of tariff,” Simonson said. “I would expect that again. It's possible that this time, [producers] would choose to raise prices less in order to grab more market share.”
In 2018, the Trump administration imposed a 25% tariff on imported steel and a 10% tariff on imported aluminum to protect domestic metal production — later making exceptions for steel imports from countries such as Canada and Mexico, the two largest suppliers of steel and aluminum to the United States.
The Biden administration has maintained most of the first Trump administration's tariffs, even adding more in May 2024 on some Chinese goods. The Tax Foundation said several studies have found the Trump-Biden tariffs raised consumer prices and reduced employment, among other things.
Still, tariffs can be a mechanism to prioritize domestic industries and production, as well as push countries to change their economic practices.
Some businesses rely on foreign suppliers
But it’s difficult for businesses like GI Stone to navigate, Dandamudi said. Her local suppliers mostly get their stone abroad.
“There’s very little stone that comes from the U.S.,” she said. “The tariffs are a very big deal for us. That's all we're talking about.”
GI Stone will often use local suppliers for smaller projects, but bigger ones — like the pair of residential towers to be built at the former Chicago Spire site — use internationally-sourced materials.
The Obama Presidential Center is using American-sourced materials, Dandamudi said, and the stone is three times more expensive than the average price of stone.
“I'm looking for additional American suppliers, but the American quartz industry is not mature enough to give me that,” she said.
China is one of the largest stone suppliers because it buys and processes large blocks of stone from other countries. Dandamudi said it’s likely other countries will start to mirror that approach, but American stone manufacturers pale in comparison to those of other countries.
She's hopeful she can find reputable manufacturers in Brazil.
An industry that pivots
Ryan Companies, a national commercial real estate firm with offices in Chicago and Westmont, is taking a wait-and-see approach. A lot about tariffs is still unknown, said Eric Nordeen, the company's president for the Great Lakes region.
Trump aides are said to be exploring tariff plans that would only cover critical imports from every country, The Washington Post reported early January. But the president-elect, on Truth Social, denied that tariff policies will be pared back.
Ryan Companies is prepared for potential price hikes, Nordeen said. He pointed to the company's ability to withstand the pandemic's impact on construction costs and supplies.
“We're actively spending time with our clients to understand their evolving real estate needs,” Nordeen said. “We just need to work through our relationships with all of our trade partners and our suppliers in our procurement process to navigate any type of price of volatility that may occur and provide as much transparency to our clients as we can.”
GI Stone is also making clients aware of costs ahead of the 2026 planning phase. The company is looking at simpler, more cost-effective strategies like buying better machinery to lower manufacturing expenses.
Stocking up on materials in anticipation of tariffs
Some companies are taking a route reminiscent of the early pandemic — stockpiling materials before costs increase.
Construction companies are looking for industrial outdoor storage space, a niche in the logistics market. The outdoor spaces are typically near highways and other major transportation hubs, making Chicago an attractive market.
Demand for outdoor storage space has seen an uptick in the last 90 days, said Mike Freitag, executive vice president at NAI Hiffman.
The trucking industry’s recent recession has opened the door for other industries to nab outdoor storage space, which can be used to stockpile materials like timber and steel ahead of new tariffs.
“In addition to trucking companies, we have seen a lot of construction, utility, infrastructure, contractor-type companies out in the market,” Freitag said.
The supply chain is also ready to adapt to any changes. Many large brands and retailers “de-risked” from China years ago, said Pierre-Nicolas Disser, head of consumer product for QIMA.
The global supply chain compliance company has seen companies pivot to other countries for materials, including textiles and electronics.
“The big brands and retailer, they might be able to weather the storm,” Disser said. “They feel ready. However, the small businesses and maybe the shoppers, they might well have to pay the price of those tariffs.”
Consumer impact from tariffs
Larger brands and companies have the time and financial resources to expand their supply chain outside of China and other countries that could be hit by higher tariffs. But newer and small businesses don’t always have that luxury, Disser said.
Consumers might shift toward making more purchases from big-box retailers, who can offer cheaper prices in the wake of tariffs.
“The ones who are 100% relying on China … there is no other option than increasing the price, or dying,” Disser said.
For Chicago's construction industry, tariffs could worsen the development pipeline. Cuculich, of Chicagoland AGC, remembers Chicago once had 60 cranes in the sky. Now, he can only count about 10.
High interest rates in recent years have increased borrowing costs and made it harder to secure funding for projects. Pricey materials could create another barrier.
Ryan Companies' Nordeen said there could be a short-term slowdown in new development. But he’s bullish on certain real estate sectors — like data centers, which saw a 43% increase in construction spending between November 2023 and November 2024 and are likely to remain hot.
“There is uncertainty — there's no question about it. But by and large, I'm not sensing a lot of fear,” Nordeen said. “There's not a lot of panic. I think there's a general sense of optimism about the economy and about the industry moving forward, even if it has to recalibrate to certain changes in policy.”
Dandamudi hopes to find what she’s looking for in Brazil. But the fear of tariffs is making things worse when high interest rates and material costs have already stalled some of GI Stone’s projects.
“As somebody who is a manufacturer in this country, I am being very adversely affected,” she said. “More than me, my clients — who are the developers and the contractors — are going to be affected.”