HVAC System Construction & Maintenance
Sourcing Guide & Market Intelligence

Fed lowers rates for the first time in 2025

• On September 17, the Federal Reserve’s Federal Open Market Committee (FOMC) voted to lower interest rates to a target range of 4.0% to 4.25%, down 0.25% from the rate it had been holding since November of last year.
• Despite indications at the start of the year that steady reductions to the relatively high 4.25% to 4.5% rate were on the horizon, the Fed held off on rate cuts for much of the year due to concerns that the combination of higher tariffs and a reduction in borrowing costs could cause rebounding inflation.
• The September cut to Fed interest rates signals a shift in this strategy, indicating that the Fed now considers weakening employment figures a greater threat than inflation. As a result, FOMC officials have also signaled that two additional rate cuts are likely before the end of the year in an effort to fight unemployment and stimulate the economy.
• Declining Fed funds rates will provide relief to borrowers by lowering the market interest rates for consumer and business loans. This reduction in the cost of borrowing will reduce the cost of many banking and financial services, and may spur increases in demand across the economy.

Tariffs to negatively impact the building and construction machinery sector

• The Trump Administration’s reciprocal tariffs, which apply general tariff rate increases to most countries the United States trades with, are set to take effect on August 7, after the administration finalized the national rates on August 1. As a result, leading sources of imported construction machinery face significantly higher tariff rates, including Japan (15.0%), Mexico (25.0%), South Korea (15.0%), the European Union (15.0%), the United Kingdom (10.0%), China (54.0%), and Canada (35.0%).
• The increase in tariffs on building and construction machinery imported from tariff-impacted countries will add to the price of imports, which are typically passed on to buyers in the form of higher prices. According to The Budget Lab at Yale, the additional tariffs on imports will increase overall prices for machinery and equipment by 13.3%.
• Additionally, the administration has already implemented 50.0% tariffs on all aluminum and steel imported into the United States, with the sole exception of imports from the United Kingdom. These tariffs will increase input costs even for construction machinery suppliers with domestic manufacturing operations.
• According to an April 2025 survey from Construction Equipment Magazine, around half of the respondents reported that the higher tariffs will increase operating costs by up to 15.0%, and more than half said they plan to pass those increases along to buyers.
• As many building and construction machinery brands source parts and components such as steel, engines, and electronics from foreign countries, higher tariff rates will put upward pressure on prices and lead to greater rental rates as manufacturers and dealers pass on costs. In addition, suppliers that source parts from tariff-affected regions may see supply chain disruptions as they seek alternative suppliers to mitigate tariff impacts.

Increased tariffs on copper imports take effect

• On August 1, the Trump administration implemented 50.0% tariffs on imported copper. Chile and Canada will be most impacted by these tariffs, as they account for a combined 87.0% of all copper imports in the United States.
• However, these tariffs are less sweeping than initially expected, only applying to semi-finished copper products, while excluding high-purity refined copper and copper input materials, such as ore and concentrate. As leading importers, such as Chile and Canada, have both high copper mining and refining capacities, they will likely avoid most of these tariffs by either exporting the copper in its unrefined form or refining the copper before exporting it to the United States
• These copper tariff exemptions limit the impact on the electronics and electrical equipment sectors because these applications require refined copper due to its optimal conductive properties.
• Thus, the prices of metal alloys that include copper, consumer products made from copper, tools, plumbing, corrosion-resistant alloys, and construction materials made from copper are forecast to rise by an average of 39.2%, according to the Yale Budget Lab.