Tariff Turmoil, Data-Center Dominance & Water Heater Regs

As I write this my family and I are making travel plans to visit relatives over the Thanksgiving break. By the time our print edition mails there will be only about two shopping weeks until Christmas. 2025 has got its coat on and is making its final good-byes before heading out. (You can see a wrap-up of our top news stories from the past year starting on pg. 6.)

For most of you running a business in the plumbing, hydronic and mechanical trades, 2025 was probably a successful year. Residential construction was flat or even a bit down in most of the country during 2025 (despite the pressing need for more affordable housing), but contractors working mid- to high-end jobs found work as the affluent and wealthy continued to build and spend.

Let me digress to share a telling datapoint I picked up during PHCC CONNECT in Grand Rapids, MI (you can read our full coverage of the annual conference in our cover story). During the Workforce Breakfast, Economist Elliot Eisenberg (the Bowtie Economist) delivered a keynote speech on the US economy and amid the many facts and figures he used to illustrate his talk one jumped out at me: 50% of all spending in the US this last year was done by just 10% of the population.

Turning to the nonresidential side, plenty of infrastructure investment money was still in the pipeline for those working in municipal water and wastewater. A lot of government money also made it out to contractors working educational and institutional jobs as schools spent on refits and upgrades.

But the big story on the nonresidential side was the continuing wave of data center projects. According to Associated Builders and Contractors, 1 in 7 of their members was performing data center work this past year. Given how water is the most efficient way to cool a data center, that meant plenty of work for plumbers and pipefitters.

The federal government also managed to deliver this year when it came to taxes. Under the One Big Beautiful Bill Act, tax provisions under the Tax Cuts and Jobs Act of 2017 (such as elevated estate tax thresholds, full expensing of newly acquired equipment under bonus depreciation, and deductions up to 20% on qualified business income) have all been made permanent.

On the regulation side, non-condensing commercial water heaters will be phased out by October of 2026. And in May of 2029, the National Appliance Energy Conservation Act (NAECA) 4 will go into effect with changes for gas-fired storage and electric storage water heaters, but with gas tankless heaters exempted.

The big headache out of DC this year was tariffs. Alongside the core issue of what is good for American manufacturing as opposed to what is good for the American economy as a whole, was the constant, nagging question, just how much of this is policy and how much is (for want of a better word) bluster?

For example, in April tariffs on China were raised to 125%. In May they were reduced to 30%. In August tariffs were suspended until November, and in November they seemed to settle at 10% (unless you count the 10% Fentanyl  tariff—down from 20%) or the agricultural exceptions or the shipbuilding exceptions or…

Well, you get the idea. Surrounded by supply chain uncertainty reminiscent of the pandemic, smart contractors stockpiled what materials they could, locked in pricing where they couldn’t, and put protective clauses in their contracts.

I could go on to talk inflation and interest rates, but I think I’ll save all that for my 2026 industry economic forecast in our next issue.

I hope this year you made a little profit. I hope you got to spend time with friends and family. I hope you got to spend a few hours here and there doing what you love, be that fishing or gaming or troubleshooting a tricky hydronic system (like Pat Linhardt).

And I want to thank you for the time you’ve spent with us here at CONTRACTOR. Have a safe and happy holiday season, and we’ll see you again in 2026.