Cement Tariffs' Impact on U.S. Prices & Production

Ed Sullivan
Apr 13
5 min read

Updated: Oct 13

What's Ahead? U.S. Cement Supply Disruptions, Production Challenges, & Prices Increases

Overview

The new tariffs will impact the U.S. economic activity, job creation, inflation, and interest rates. These factors in turn, will adversely impact construction activity and cement consumption.

This report specifically addresses the potential impact tariffs may have on the United States cement market. The discussion centers on the landed cost increases, whether the costs are absorbed by the importer, and strategies undertaken to mitigate price increases. While these new tariffs may be part of a negotiating strategy by the Administration, for the purpose of identifying the impact of these tariffs to the U.S. cement industry, let’s treat them as "at face value."

Context: The Economy and Cement Market

Initially, The Administration rolled out very aggressive “reciprocal” tariffs levied on 90 countries that, if implemented, would have raised the cost of cement imports entering the U.S. market by 19%. Days later, the Administration adjusted its tariff policy. Tariffs were reduced to an across the board 10% tariff. However, Canadian and Mexican tariffs are exempt from any tariffs, and China’s tariff was increased to 145%. Specific tariffs on automobiles, steel, and aluminum are unchanged. Planned tariffs on lumber and pharmaceuticals are still being explored.

While the new tariff regime is a reduction from the initial concept, make no mistake, they will cause U.S. economic distress and adversely impact construction activity and cement consumption. Prior to the tariff ordeal, the U.S. economy was slowing, plagued by uncertainty, and becoming vulnerable to any disruptions. Even if the spin is that this was all part of the “art of the deal,” the recent gamesmanship will have significant adverse consequences. Retaliation will add to the hurt. A further weakening of the economy is expected.

The U.S. construction and cement markets will not strengthen unless the job markets remain strong and interest rates (mortgage and commercial) decline significantly. That is not going to happen this year. The only way a significant decline in interest rates materializes is in the context of a substantial economic downturn. In any case, for the third year in a row, U.S. cement consumption is expected to retreat.

The REAL Costs of Tariffs

There is a difference between a cost increase and a price increase. A cost increase may lead to a price increase – but not necessarily. The new tariffs will raise the cost of bringing a foreign produced ton of cement to the U.S. market. How much the costs increase is dependent on the country of origin for the cement. Most cement imports entering the U.S. marketplace will carry a 10% tariff.

Here's the rough math. Applying the tariff rates by the 2024 market share held by each importer yields the average increase in costs implied by the new tariff structure. By this calculation, the new tariff rates increase the costs on imports by 8.5%. For the market as a whole, tariffs add an incremental increase of 1.86% to total costs of servicing the market.

The tariff cost is paid by either the foreign exporter or the domestic importer. Some of that cost increase will be passed on directly in the form of higher prices. Price negotiations between the importer and exporter will likely materialize. The importer may partially or fully absorb the added cost associated with the tariff – resulting in a detriment to profits. How much of the tariff cost is passed through determines the price increase.

Factors Influencing the Pass Through of Tariff Costs

The assessment of tariffs’ impact on the U.S. cement market is squarely rooted in how much of the cost increases associated with the tariffs are passed on in the form of higher prices. Without an assessment of actual price, any fundamental analyses of the tariff impacts on the U.S. market are hindered.

A multitude of factors can influence how much of the added tariff costs will be passed onto consumers. This pass-through will likely vary by region, state-by-state, and possibly within some states. Assessment of the local market conditions is critical. (While more detailed local market analyses are preferred, the table in the next section below segments the market by seven major import regions.)

It is also important to note that no information exists on import share, volume by state, or region. Imports by port-of-entry is used as a proxy. It is assumed that the volume of cement imported into Boston, for example, stays completely in the New England area. Imports into Los Angeles stay in the Southwest.

The factors determining pass though of tariffs onto consumers focus on the level of competition and the alternatives to imports that prevail in a local market. In addition to local market condition assessments, weakness in market demand and excess global capacity could play roles. An extra wrinkle is the nature of multinational corporations and whether the imports are being sourced from within the company.

Exporters Will Likely Absorb Much of the Tariff Cost Increases

The global cement industry is currently operating at 57% utilization. This reflects roughly 1.65 billion metric tons in excess capacity. The tariffs will likely slow world economic growth. As evidence of this, the Baltic Dry-Index has declined 21% since April 1st. The dry-bulk, ocean freight rate reflects the shipping costs for dry-bulk ships used to transport cement, steel, and coal. As global conditions weaken, so will the transport rates. As a small consolation, the global economic disturbance caused by the tariffs is working to lower shipping costs – slightly offsetting the tariff premiums on cement exports.

Weakened Business Conditions Limit Ability to Shed Tariff Costs onto Consumers

During robust demand periods, characterized by strong cement consumption levels, the increases in costs are easily passed onto the consumer. The opposite is true. During economic downturns characterized by weak cement consumption levels, the exporter is more likely to absorb cost increases to preserve volumes.

The U.S. cement market is expected to weaken through most of 2025. Competition for scarce projects will intensify. With this erosion in global and U.S. demand, it's likely cement exporters will absorb a high proportion of increases from the tariff costs. This could dramatically reduce the prospects of cement price increases. For exporters and importers that don’t absorb on the tariffs' impacts, consumers will likely shift to exporters that will.

Increases in Domestic Production are Determined by Degree of Pass Through

There are actions that could be undertaken to reduce import volume as a result of exposure to the tariffs. The domestic U.S. industry, for example, is operating near 72% clinker capacity utilization. Increasing the utilization rate and SCM usage could decrease the reliance on imports and reduce the price impacts of the tariffs.

Increasing domestic clinker production by 10 MMT and reducing imports by an equal amount is possible. Under the scenario whereby most tariff costs are absorbed by the exporter, incentive exists to increase reliance on domestic sources of supply. Some increase will materialize, but if it occurs, it will be limited. The opposite is true. The less that tariffs are absorbed, implies more domestic production.

Regional and Cement Company Impacts

The impact of U.S. tariffs will vary across regions, depending on the degree of reliance on imported cement. U.S. companies that depend heavily on imports to meet local demand will face higher sourcing costs and possible supply constraints. Exporters to the U.S. market are expected to bear the greatest impact, as they will likely absorb a substantial share of the tariff costs. The resulting decline in shipment volumes to the U.S. will place downward pressure on company revenues and margins, materially weakening their bottom line.

About The Sullivan Report

The Sullivan Report delivers subscription-based economic forecasts and market updates tailored to the cement, concrete, construction, and aggregates industries. Its flagship publication, the Cement Outlook, is released three times a year and features 5-year forecast projections, expert analysis, and actionable insights to support informed decision-making and long-term strategic planning amid an evolving economic landscape.

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