In March, while the backlog for construction projects saw an improvement, contractor confidence dipped due to tariff-related impacts. According to a survey by Associated Builders and Contractors conducted between March 20 and April 6, approximately 80% of contractors were informed by suppliers about price hikes linked to tariffs. Additionally, around 20% experienced project interruptions in March because of these tariffs. Despite fewer than 26% expecting profit growth in the next six months, the backlog increased to 8.5 months, marking a rise from February's figures.

The increase in backlog offers insight into contractor sentiment before recent tariff implementations. While hiring expectations improved, concerns over profit margins and sales intensified, especially post-tariff announcements. Although all nonresidential subsegments added projects to their backlogs, infrastructure remains the only category showing significant year-over-year gains. Tariffs have begun affecting construction pipeline projections, potentially leading to delays or cancellations in planned investments.

Rising Backlog Contrasts with Declining Optimism

Despite a slight uptick in backlog duration, contractors' optimism has been dampened by ongoing economic uncertainties. The survey reveals that although most contractors are adding projects to their pipelines, many are simultaneously facing challenges posed by rising material costs. This scenario highlights a complex market environment where increased workloads coexist with financial apprehensions. The increase in backlog suggests a temporary boost in activity levels but may not reflect long-term stability given current trade conditions.

Anirban Basu, ABC's chief economist, noted that the backlog expansion in March primarily captures sentiments prior to the latest tariff announcement on April 2. This timing indicates that the reported optimism might be overstated concerning future prospects. As more businesses consider delaying or canceling capital investments amid volatile market conditions, the construction sector could face prolonged repercussions if high tariff rates persist. These factors underscore the importance of monitoring evolving trade policies and their impact on construction dynamics.

Impact of Tariffs on Construction Pipeline

Tariff-induced disruptions are reshaping the construction industry's trajectory, influencing both short-term operations and long-term planning. With nearly one-fifth of surveyed contractors reporting project interruptions, it is evident that tariffs are creating tangible obstacles within the sector. Furthermore, the anticipation of declining profits among more than 40% of respondents signals broader economic concerns extending beyond immediate project execution issues. These developments challenge contractors to reassess their strategies amidst shifting regulatory landscapes.

Basu emphasized how tariffs are significantly altering the outlook for construction activities in the coming years, particularly by 2025. Businesses are increasingly cautious about committing to new projects, fearing potential losses from fluctuating material prices and uncertain demand patterns. Infrastructure appears resilient, maintaining steady growth compared to other categories, yet even this segment faces potential headwinds as overall market confidence wanes. If elevated tariff rates endure, further deterioration in construction conditions seems inevitable, necessitating adaptive measures from stakeholders across the industry spectrum.