South Florida construction boom could grind to a halt thanks to new tariffs

There are some 80 major active construction projects in Miami-Dade, making it one of the hottest real estate markets in the country. Broward has as many as 50.

But if new tariffs are imposed on Chinese raw materials, as the Trump Administration has warned, many of those projects could grind to a halt.

“[This] will wreak havoc in so many areas,” said Anthony Graziano, senior managing director for Integra Realty Resources, a real estate firm, in an email.

In the latest set of volleys between the Trump Administration and China over trade, the White House on Monday released a list of about $300 billion in goods imported from China that could be soon subject to a 25 percent tariff if a deal isn’t reached soon. Monday’s announcement followed a Friday notice that the administration would impose duties of as much as 25 percent on $200 billion worth of Chinese goods. Between the two announcements, almost any item coming from China, from raw materials to handbags, would face levies.

In response, China on Monday released its own list of goods the U.S. exports to China, valued at about $60 billion, that would face retaliatory duties.

Unless a deal is reached, the new round of tit-for-tat tariffs could hit as soon as June. And South Florida is likely to feel a significant impact.

Most at risk is the region’s booming construction industry. Developers and contractors must negotiate deals on raw materials like steel and concrete — two of the items targeted by the White House — well in advance to meet project deadlines.

“It’s like the futures industry,” said Peggy Marker, president of Marker Construction Group, a construction management and general contracting firm, in an interview. “You don’t have time to react — you have to anticipate and proceed as if they’re going to hit.”

Depending on the date materials were set to be delivered, some projects may emerge unscathed. But last year’s 10 percent increase on materials caused some project costs to increase by hundreds of thousands of dollars, Marker said.

“For projects like a concrete building, [the cost increases] can be a deal breaker,” she said.

Graziano said that even if subcontractors are able to source materials from countries not impacted by tariffs, like India, the collective demand from the new sources would cause prices to rise anyway.

“Any time you impose an external cost on a good that has nothing to do with the value that item produces — you are going to disrupt the economic benefit of producing that item,” he said. “That in turn will lead to supply-chain disruptions, inefficient market pricing, imbalance of supply and demand, and all of the unintended consequences of market inefficiency.”

The list of possible ripple effects could affect South Florida industries including home decor, textiles and floral arrangements. Though the flowers themselves often come from Colombia, supplies such as sleeves, buckets and vases come from China, said Christine Boldt, executive vice president of the Association of Floral Importers of Florida, via an email.

Everyday South Florida shoppers could also be affected, as many of the goods targeted are finished electronic products, according to Ken Roberts, president of WorldCity, a Miami-based firm that tracks trade data.

Only one other port on the eastern seaboard, Savannah, Ga.’s, is more dependent on Chinese trade than PortMiami, Roberts said in an interview. Even before the Trump administration’s latest announcement, trade from China through PortMiami was down 17 percent through March.

For Roberts, South Florida’s robust import, export, and logistics industry is also likely to see some cost increase if the tariffs hit. Gabriel Rodriguez, president of A Customs Brokerage in Doral, said in an email that he has been deluged by phone calls and emails from importers trying to ascertain whether their products would be subject to the increase. He, too, said he has seen a decline in Chinese imports of around 20 percent this year.

“Many of our customers have elected to hold off on ordering new inventory unless absolutely necessary while they source from other countries to continue to supply their operations,” he said.

Foreign parts distributor Steve Feig says the U.S. is getting screwed by China.

“They don’t play by same rules as we do,” he said in an interview. “They give subsidies, which is actually against [international trade rules].”

But Feig, the longtime president of Hialeah-based auto products company Foreign Parts Distributors, said the proposed 25 percent duties on most Chinese imports is not the way to deal with the problem.

Last year, when the Trump Administration imposed 10 percent duties, Feig’s company paid nearly $1 million more than it otherwise would have to satisfy Treasury requirements. The company is healthy, he says, so there was “some wiggle room” with a 10 percent levy.

But an additional 15 percent is not tenable.

“We might be okay, but other small businesses like ours will go out of business,” he said.