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May 21, 2025 - Economists Cautiously Optimistic About US-China Tariff Pause

• On May 12, 2025, the US and China declared a 90-day reduction in the tariffs each country imposes on the other amid further negotiations. The US tariff on imports from China was reduced from 145% to 30%, while China dropped its duty on US imports from 125% to 10%. In response to the news of the tariff pause, some construction economists and other industry experts expressed cautious optimism, according to Engineering News-Record. Dodge Data Network Chief Economist Eric Gaus said the de-escalation of tensions is welcome news, but uncertainty persists as negotiations between the US and China play out. The chief economist at freeagenteconomist.com, Richard Branch, noted that while the reduced trade tensions could revive project planning and construction, the stop-and-start nature of the Trump administration’s China policies – and resulting uncertainties - could resume if a deal isn’t finalized.
• The Associated Builders and Contractors (ABC) Construction Backlog Indicator rose 0.3 months to 8.7 months in April 2025 compared to a year earlier. April backlogs were up 0.2 months from March. The commercial and institutional backlog increased by 0.6 months in April to 8.7 months over the same month a year earlier. However, April’s infrastructure construction backlog fell 2.8 months to 7 months year-over-year, and the heavy industrial backlog fell by 1.6 months to 8.7 months over the same period. The ABC’s Construction Confidence Index for sales fell to 62.1 in April from 62.6 in March. A Confidence Index sales reading of 50 or more indicates most contractors are optimistic about sales. ABC Chief Economist Anirban Basu said, “Nearly 22% of contractors had a project delayed or canceled in April due to tariffs, up from 18% in March, while 87% have been notified of tariff-related materials price increases. Contractors remain busy despite these headwinds; backlog rose in April and is now at the highest level since September 2023. While ABC members remain upbeat about the near-term outlook, the share of respondents that expect their sales to decline over the next six months rose to 19% in April, up six percentage points since the start of the year.”

• The state of US infrastructure received a grade of C, according to a recent report card issued by the American Society of Civil Engineers (ASCE) that rates 18 infrastructure categories. The C rating was the highest grade since the ASCE began releasing the reports in 1998. The ASCE cited increased infrastructure spending through the Infrastructure Investment and Jobs Act as the primary driver for the grade improvement. Types of infrastructure that received the highest grades included ports (B), rail (B-), solid waste (C+), broadband (C+), bridges (C), and hazardous waste (C). Areas that received the lowest grades included stormwater (D), transit (D), aviation (D+), dams (D+), energy (D+), levees (D+), roads (D+), schools (D+), and wastewater (D+). The authors of the ASCE reports urged leaders in Washington DC, “to continue sustained investment in infrastructure and build on progress made to improve infrastructure after decades of deferred funding and under investment.”
• North American construction and engineering spending in 2025 is expected to grow by 2% after increasing an estimated 7% in 2024, according to FMI’s second-quarter 2025 North American Engineering and Construction Outlook. Nonbuilding construction will lead growth in 2025, supported by solid public funding commitments with bipartisan support. Water projects will lead infrastructure spending growth in 2025 with a rise of 8%, followed by power (6%), sewage and waste disposal (6%), and highway and street (2%). Single-family construction spending is forecast to rise by 3% in 2025, but headwinds include higher costs due to materials tariffs, tighter immigration enforcement, and a lack of affordability. A recent jump in new apartment supply and unfavorable cost conditions will reduce multifamily spending by 12% in 2025. Nonresidential building construction spending will be flat in 2025, as steady growth in segments including amusement and recreation, educational, transportation, and communication will be offset by weakness in lodging and commercial.