U.S. Construction Equipment Market: Can Infrastructure Spending Offset Tariff Costs and a Persistent Labor Shortage Through 2031 | Arizton

The U.S. construction equipment market was estimated at 377.7 thousand units in 2025 and is expected to reach 476.9 thousand units by 2031, growing at a CAGR of 3.96% during the forecast period. Market growth is supported by infrastructure spending, private investment, and rising equipment demand from areas such as data centers and advanced manufacturing. At the same time, tariffs are raising manufacturing costs, skilled labor shortages are limiting construction capacity, and higher financing costs are making equipment purchases more selective. These conditions are influencing equipment demand, manufacturing, sourcing, and technology decisions across the U.S. construction equipment market.
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Economic Pressures Are Weighing on U.S. Construction Equipment Investment
In 2026, the U.S. construction equipment market is seeing strong demand in high-growth areas such as data centers and advanced manufacturing, while broader economic pressures are weighing on investment activity. Rising tariffs on steel, aluminum, and copper have pushed up equipment and construction costs, while elevated cost structures and interest rate uncertainty are encouraging cautious investment and delaying some large-scale projects. Labor shortages remain a structural challenge, with a substantial deficit of skilled workers constraining productivity and extending project timelines. This is accelerating the adoption of automation, telematics, and advanced equipment solutions aimed at reducing labor dependency. Despite these pressures, infrastructure investment and technology advancements continue to support cautious but steady market expansion.

How the 2025 Tariffs Impacted OEM Costs
Tariffs are creating direct cost pressure for manufacturers importing equipment and components into the U.S. The impact is already visible in the financial results of major construction equipment OEMs, with tariff-related expenses adding to manufacturing costs during 2025. The increase in costs is putting pressure on operating profitability while making production, sourcing, and pricing decisions more important for manufacturers competing in the U.S. market.

Caterpillar: Tariff Costs Are Reaching the Construction Equipment Business
Caterpillar Inc. estimated incremental tariff costs of approximately $2.6 billion in 2025, with its construction equipment segment accounting for $420 million of additional manufacturing costs in Q4. The company expects tariff-related costs of around $2.6 billion in 2026, showing that tariff exposure is continuing into the next planning cycle.

John Deere: Tariffs Are Adding to Pricing Pressure
John Deere reported approximately $600 million in tariff expenses in FY 2025, while its construction and forestry segment faced heightened competitive pricing pressure. The combination of higher production costs and pricing pressure is adding complexity to equipment pricing and profitability.

Komatsu: U.S. Tariffs Are Affecting Production Economics
Komatsu Ltd. estimated that new U.S. tariffs would add significant costs in 2025. For a global equipment manufacturer, the impact makes U.S. trade policy an increasingly important consideration in production and sourcing decisions.

Volvo CE: Tariff Impact Is Continuing Into 2026
Volvo Group reported tariff-related costs in 2025 and expects the impact to continue into 2026. The continued cost exposure shows that tariffs are becoming an ongoing consideration for manufacturers operating in the U.S. construction equipment market.

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OEMs Are Expanding Regional Manufacturing
Rising tariff exposure is encouraging manufacturers to reconsider production and sourcing strategies. JCB announced in April 2025 that it was expanding its manufacturing facility in San Antonio, Texas, with a $500 million investment. The expanded facility is expected to reach approximately one million square feet, employ around 1,500 workers, and begin production the following year. JCB indicated that the facility would help offset tariff effects over the medium term.
In May 2025, Sakai announced plans to move production of its 54-inch SV204 soil compactor from Japan to its facility in Adairsville, Georgia. The move would enable all soil compactors sold in North America to be manufactured locally, alongside efforts to increase component sourcing within the region.
LiuGong North America also stated in May 2025 that it was evaluating the feasibility of manufacturing some machines in the Americas. These developments show a growing focus on regional production and component sourcing as manufacturers respond to tariff and supply-chain conditions.

Higher Interest Rates Are Keeping Equipment Investment Cautious
Higher interest rates continue to constrain the U.S. construction equipment market by increasing equipment financing costs and making new projects harder to justify. Although the Federal Reserve reduced the federal funds rate to 3.50%-3.75% by late 2025, borrowing conditions in 2026 remain tighter than during the near-zero-rate period of 2020-2022. Persistent inflation above the Federal Reserve's 2% target, along with mixed labor market signals, is reinforcing cautious investment behavior. Stricter lending standards and higher equity requirements are also limiting new project development, particularly in multifamily housing and commercial real estate, reducing the pipeline for capital-intensive equipment purchases.

Skilled Labor Shortages Are Limiting Construction Capacity
The shortage of skilled workers remains a structural constraint on U.S. construction activity in 2026, limiting contractors' ability to start and execute projects and affecting equipment demand. The Associated Builders and Contractors estimates that the industry will need approximately 349,000 additional workers in 2026 and 456,000 in 2027, beyond normal hiring levels, to keep pace with construction activity and new developments. The workforce gap is increasing pressure on contractors to improve productivity and execute projects with limited labor availability.

Infrastructure Investment Is Supporting Demand Despite Market Pressures
The Infrastructure Investment and Jobs Act (IIJA) is providing an important source of construction equipment demand in 2026 as infrastructure projects move into execution. Transportation spending, particularly on roads, bridges, and highways, is supporting demand for earthmoving, road construction, and material handling equipment. Activity across transportation, energy, water, broadband, and environmental remediation is also creating demand for a wider range of equipment, from heavy-duty excavators and cranes to compact and utility equipment. Bridge replacements, water system upgrades, broadband expansion, and major transit developments are helping sustain the equipment demand pipeline despite higher costs, tighter financing, and labor constraints.

U.S. Construction Equipment Market Outlook Through 2031
The U.S. construction equipment market is expected to maintain steady growth through 2031, supported by infrastructure investment, private construction activity, and advances in construction technology. At the same time, tariffs, financing costs, and labor shortages are creating constraints across equipment purchasing and project execution. The balance between infrastructure-led demand and these cost and capacity pressures will remain important to the market as equipment manufacturers, contractors, and other industry participants plan investments through 2031.

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