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Tariffs to negatively impact the building and construction machinery sector

• The United States implemented a blanket tariff of 10.0% on all US imports of foreign goods, as well as a cumulative 145.0% tariff on China and a 25.0% tariff on goods from Mexico and Canada not compliant with the U.S.-Mexico-Canada Agreement. Other large sources for imports of building and construction machinery, like Japan, South Korea, and Germany, may face higher tariffs; as of April 9, a 90-day pause on reciprocal tariffs is in place.
• The increase in the average tariff rate 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 from 3.1% to 6.4%.
• According to a survey from Construction Equipment Magazine in April 2025, around half of the respondents reported that the higher tariffs would increase operating costs by up to 15.0%, and more than half said they plan to pass those increases along to buyers. The United States implemented a full 25.0% tariff on steel and raised the aluminum tariff to 25.0%, which will increase the cost of raw materials, leading to higher costs for manufactured building and construction machinery.
• 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 higher 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.
• Japan, one of the largest sources of building and construction machinery imports, will now face a flat 10.0% tariff, negatively impacting US buyers. As a result, major suppliers in these markets, such as Hitachi, Komatsu, Kubota, Sumitomo, Kawasaki, and Toyota, will face obstacles to competition in the US market.

United States announces additional tariffs on China

• In February 2025, the United States announced 10.0% tariffs on imports from China. The tariffs took effect on February 4, 2025.
• The tariff plan applies to all merchandise imported for consumption and applies in addition to other duties and fees that are in place, with limited exceptions.
• In response, China announced a 15.0% tariff on products such as coal and natural gas, as well as a 10.0% tariff on crude oil, agricultural machinery, pickup trucks, and large cars. The tariff executive orders indicate retaliatory tariffs could lead to further escalation in rates.
• Providers in this market rely on inputs often sourced from China. As such, ProcurementIQ will continue to monitor developments in this space and update analysis accordingly.

Freight shipping rates fall from peak

• Shipping through the Suez Canal has continued to be curbed by the Houthi movement in Yemen attacking vessels passing through the Red Sea. The Suez Canal handles around 12.0% to 15.0% of global trade.
• While the Panama Canal had enacted travel restrictions through its canals due to a drought and low water levels, these restrictions have been lifted with the early arrival of the rainy season. In September 2024, the canal will be able to increase transit slots to 36 a day, which is the typical average.
• The Suez Canal connects the Mediterranean to the Indian Ocean via the Red Sea, which reduces the travel time as ships moving between Europe and Asia do not have to go around Africa. However, shipping through the Suez Canal has fallen sharply in 2024 due to attacks on civilian shipping by the Houthi movement in Yemen; daily ship crossings have decreased from 69 ships on November 18, 2023 (the week before the first Houthi attack) to 27 on July 7, 2024.
• While shipping rates increased sharply due to the issues in the Suez and Panama, with the benchmark Drewry World Container Index increasing from $1,469 on November 16, 2023 to $5,937 on July 18, 2024; however, rates have fallen since, dropping to $3,803 as of December 19, 2024. Shanghai to Rotterdam freight rates have decreased from $8,267 to $4,819 per 40-foot container since mid-July 2024 and Shanghai to Genoa rates have fallen from $7,727 to $5,424 per 40-foot container during the same period.
• However, continued turmoil in the Middle East, looming port strikes, and anticipated tariff hikes are expected to continue to contribute to volatility in freight rates. Furthermore, war risk insurance rates for shipping through the Red Sea have increased sharply, which raises the cost of shipping through the Suez Canal.