Higher construction, manufacturing prices likely the result of federal tariffs

This will end in higher prices for New Mexicans.

The sentiment, which has become common as a result of numerous tariff announcements from the Trump administration, came from local economist Kelly O’Donnell. She said New Mexicans will feel a cost burden from President Donald Trump’s latest levy.

The president Monday afternoon signed an order imposing a 25% tariff on all steel and aluminum imports, just a week after pausing tariffs he planned to impose on Mexico and Canada. It comes as Trump also imposed a 10% tariff on China and has made plans to cut down the size of the federal workforce.

“There’s no way that this is a good thing,” O’Donnell said.

Construction and manufacturing will be some of the hardest hit industries, O’Donnell said, leading to increased costs for customers at the end of the line.

All metal products will go up in price as a result of this, said Doug Cone, owner of New Mexico Metals. The business caters to smaller quantity users of raw materials, so it doesn’t compete with international markets.

Tariffs on metals were something Cone supported in 2018, when Trump imposed duties on steel and aluminum for all countries except Canada and Mexico. It helped fend off foreign companies pumping the products into the U.S. at a cheaper price than Americans could afford to make and sell at, Cone said.

“This time around, though, there isn’t any clear-cut reason that I can see for imposing tariffs,” Cone added.

And, unlike 2018, Trump’s 25% steel and aluminum tariffs apply to all countries — including neighboring countries Mexico and Canada, which made up nearly 40% of all U.S. steel imports last year, according to Reuters.

Cone said his Phoenix and Albuquerque stores, both of which he described as smaller scale, have materials on hand with origins from 15-25 different countries.

“It is a global marketplace on the metals, on the raw materials, and there’s no getting around that. That’s not going to change, either with or without tariffs,” Cone said. “All the tariffs are going to do is change the pricing.”

O’Donnell, chief research and policy officer of Santa Fe-based Homewise, anticipates homebuilding and commercial building construction will face higher costs, something that will exacerbate New Mexico’s existing housing crisis. The state is short of about 32,000 affordable housing units for low-income communities, according to a 2022 report from Housing New Mexico.

“Prices are far too high for many New Mexicans already,” O’Donnell said.

Steel and aluminum are also important products in the clean energy sector, which has boomed in New Mexico over recent years. Big-name companies like Array Technologies, Maxeon Solar and Arcosa Wind Towers all picked New Mexico for expansion facilities in recent years.

About 85% of aluminum ingots — raw material — are imported into the U.S., according to Peter Lorenz, CEO of the Albuquerque-based solar equipment provider Unirac. He added that most of that comes from Canada.

So not only would he expect increased costs in the solar industry, he told the Journal, but in all industries using aluminum. While some industries could continue operations under that burden, prices would inevitably be passed onto customers, Lorenz said.

O’Donnell said the tariffs, as well as the potential clawback of federal clean energy funding, could deter New Mexico from reaching its aggressive clean energy goals. By 2050, all utilities in the state are required by law to operate carbon-free, and Gov. Michelle Lujan Grisham last month in her State of the State Address urged legislators to codify net-zero emissions by 2050.

On a broader scale, the U.S. will suffer energy-wise because of its dependence on fuel from Canada, O’Donnell said. About half of all petroleum imports come from Canada, according to the U.S. Energy Information Administration.

That may not affect New Mexico too much since, as a state, it’s not very dependent on Canadian fuel. However, O’Donnell said the state exports natural gas, and any negative impact on the oil and gas industry in New Mexico subsequently affects state revenues.

Perhaps the most worrisome concern with all of Trump’s tariff threats is a trade war, she said.

“The biggest, the most significant negative impact from an economic perspective is really the uncertainty it creates,” she said. “Uncertainty breeds an unwillingness to invest, and when companies are fearful of investing because they don’t fully understand the risks … that’s where you get massive economic flow down.”

And the legality — or lack thereof — of moves like this isn’t stopping the Trump administration from enacting them, O’Donnell added.

Amid all of these federal actions, New Mexico’s Legislature is more than a third of the way through its 60-day session. Both Democrats and Republicans are pushing for tax cuts this year, thanks to a booming budget that’s seen surplus revenue for years because of the oil and gas industry.

It’s a move O’Donnell recommended against. She said now is the time to shore up the stability of the budget as “economic times ahead are very uncertain.” It’s almost like preparing for a catastrophe of “unanticipated proportions,” she added.

“We are basically kicking off a trade war,” O’Donnell said. “And I don’t think there are going to be any winners. The question is going to be, who’s the biggest loser?”