Tariff Pressures Cause Uncertainty in the Commercial Construction Outlook

Written by Aaron Champagne, Director of Client Development

The first year of the current administration has brought on sweeping tariff policies, which have begun to reshape the economics of commercial construction in the United States. Increased pressure on critical construction components—including steel, aluminum, lumber, and finished wood products—have driven up costs, stretched supply chains, and intensified risks across an already constrained labor market.

At the center of this shift are the sharp increases in tariffs on steel and aluminum imports, which now apply to a broader array of goods and raw materials. Tariffs on lumber and cabinet-grade wood have also tightened, extending the cost implications into finishing materials. These new tariffs are effectively acting as a tax on construction materials, which in turn are amplifying price volatility at a time when many developers are already wrestling with razor thin margins.

Structural steel, metal fabrications, and imported millwork are now subject to steep markups, and lead times have lengthened as buyers scramble to identify tariff-exempt sources or reroute orders. Meanwhile, domestic producers are struggling to absorb additional demand, leading to bottlenecks and premium pricing for domestic content. Contractors are responding with a mix of strategies. Some are locking in material prices through forward purchases, while others are substituting more affordable or domestically sourced materials where possible. With contracts increasingly bearing the burden, price increases are being passed through to owners — but not without friction.

Financially, the impact of these tariffs is increasing project-level strain. Hard cost inflation and labor constraints are pushing up bid prices, prompting owners to demand more robust contingencies, and spurring investors to rethink feasibility. Some nonessential projects are being delayed or canceled altogether, while others are renegotiating contracts to include tariff clauses.

Looking ahead over the next six months, the commercial construction sector is likely to continue facing external pressure. Tariffs are expected to remain in force, and domestic supply chain constraints could persist even as domestic supply increases. Lead times imported products may remain stretched, driving premium pricing. On the labor front, unless a sharp pullback in project starts materializes, skilled trades may continue to be scarce.

Looking further out, the cost per square foot for new construction will likely increase. As input costs remain elevated, the industry may increasingly lean into productivity-enhancing strategies—such as prefabrication, modular construction, and design-for-manufacturing approaches—to mitigate exposure and control variables in production. The industry may also see a realignment of supply chain from overseas to domestic sources, which will reduce tariff risk over time.

These shifts pose both challenges and opportunities. For owners and developers, there will be an increased emphasis on contingency planning, and contractual flexibility. For contractors, investing in better production capabilities, streamlining supply chains, and developing smarter ways of working are imperative in this market. Tariffs are no longer a marginal concern for commercial construction—they are a core variable shaping costs, risk, and strategic behavior across the sector. If the current trajectory holds, neither material sourcing nor labor planning will return to “business as usual” for some time.