Trump 2.0 short-term good for construction but brings labour and housing risks, say economists

Donald Trump (Image: Ali Shaker/VOA, Public domain, via Wikimedia Commons)

That’s according to Oxford Economics, which assessed the prospects for the global construction industry ahead of Trump’s administration taking over the reins of the US government in January.

Its economists forecast that US fiscal expansion in the form of tax cuts, interest rate cuts, and higher federal spending in areas like defence would likely support privately funded construction activity in the near-term. Oxford Economics then expects fewer rate cuts in 2026 amid higher debt and inflation expectations. Higher rates could spill into other economies and over the longer term weigh on investment and therefore construction activity, it warned.

The economists also suggested that cuts to immigration would reduce demand for housing and risk making construction labour shortages in the US worse.

Meanwhile, they expressed uncertainty on the impact of increased tariffs aimed at protecting US manufacturing. Oxford Economics said it expected higher US tariffs to boost manufacturing and warehousing investments in ASEAN countries. But the impact on the US is likely to depend on retaliatory tariffs from other countries.

And with the US’s approach to net zero and the Russia-Ukraine conflict expected to change under Trump, Oxford Economics said global uncertainty has likely increased which could see an increasing number of construction projects delayed or cancelled.

Oxford economics has set out two possible scenarios and how they affect world GDP: “limited Trump”, which is where it has shifted its macroeconomic baseline, and “full-blown Trump” which it said remains a possibility if certain conditions are met.

The potential for the Republicans to take control of Congress increases the odds of more extreme policies akin to those in the “full-blown Trump” scenario being adopted, Oxford Economics said.

Nicholas Fearnley, head of global construction forecasting at Oxford Economics, said, “US fiscal expansion is likely to support privately funded construction activity in the near-term, but will result in slower monetary loosening in 2026. Immigration cuts, however, will reduce long-term demand for housing, and risk exacerbating construction labour shortages in the US.”

On tariffs, he added, “We expect them to boost manufacturing and warehousing investment in ASEAN countries, while the impact in the US depends on the extent of retaliatory tariffs from other countries. China may continue to reroute US-bound exports to other countries - but there could be a reduction in Belt and Road projects.”