More than 40% of construction firms expect profit margins to shrink in the next six months, survey finds.
As the construction industry continues to navigate an evolving economic landscape, a new report reveals that the latest round of tariffs is beginning to take a toll on contractor sentiment and financial outlooks.
According to a recent survey by the Associated Builders and Contractors (ABC), while project backlogs grew slightly in March, overall contractor confidence declined. The study, conducted from March 20 to April 6, underscores growing concerns over material costs and project disruptions stemming from tariffs introduced earlier this month.
Key Findings:
- Over 80% of contractors reported receiving price increase notifications from suppliers tied to tariff impacts.
- 20% of contractors experienced project delays or interruptions due to tariff-related issues during March.
- More than 40% of respondents anticipate a decline in profit margins over the next six months.
- Fewer than 26% expect profitability to improve during that period.
- Meanwhile, project backlogs increased slightly to 8.5 months, up from 8.3 months in February.
Industry Sentiment Shifts
The rise in backlog figures paints a mixed picture. While it reflects sustained activity across many nonresidential construction sectors, economists warn the data mostly captures sentiment prior to a significant policy shift.
“This backlog growth occurred before April 2, the date when one of the most impactful economic policies in recent memory was announced,” said Anirban Basu, ABC’s chief economist. “What we’re seeing now is a marked shift in contractor confidence that aligns with the announcement and expected repercussions of the new tariffs.”
Despite a modest uptick in hiring expectations during the survey period, contractors reported heightened concerns regarding both profitability and sales outlooks—particularly those who responded after the April 2 policy changes were unveiled.
Tariff Effects Ripple Across the Pipeline
The construction sector, particularly in nonresidential segments such as commercial buildings and industrial projects, has shown resilience in recent months. However, the introduction of steep tariffs has added volatility to an already uncertain market.
“These tariffs have already begun to erode the construction outlook for the remainder of 2025,” Basu warned. “There is growing hesitation among developers and project owners to move forward with planned capital investments under these new cost pressures and market fluctuations.”
Notably, the infrastructure sector remains the only category demonstrating significant year-over-year gains, offering a rare bright spot amid a broader market cooldown.
Cautious Optimism Amid Uncertainty
While activity has yet to dramatically slow, industry experts suggest the full impact of tariffs will become clearer in the coming months.
“If these elevated tariff rates remain in effect, we can expect further deterioration in business conditions,” Basu added.
For now, contractors are bracing for tighter margins and potential shifts in client budgets as they navigate the months ahead. Companies are also keeping a close eye on federal policy developments, hoping for clarity and relief in an increasingly complex economic environment.
