Trade Tensions Fuel Construction Costs: Tariffs Drive 3.2% Surge in Nonresidential Building Expenses
This analysis was adapted from reporting by Construction Dive. For daily industry news and insights, subscribe to the free Construction Dive newsletter.
The ripple effects of recent trade policy are now being tallied on construction balance sheets. According to an analysis of federal price data, tariffs were a primary driver behind a 3.2% increase in nonresidential construction costs in 2025. Economists warn the policy-induced inflation is spreading from raw materials to machinery and shows no sign of abating.
"Trade policy will continue to put upward pressure on certain materials this year," said Anirban Basu, chief economist for Associated Builders and Contractors. For commodities less exposed to tariffs, such as asphalt or crushed stone, prices are expected to remain relatively stable in the coming months. Basu attributed this to generally soft demand for construction services, with the notable exception of the booming data center sector.
Surprisingly, the expectation of further price jumps has not yet dimmed contractor optimism. Basu noted that about 70% of ABC members expect their profit margins to hold steady or even grow over the next two quarters.
However, the hard data tells a story of mounting cost pressures. "Even though these indexes are based on selling prices of domestic producers, it is clear that the steep tariffs on imported metals and products are enabling U.S. sellers to push up costs for construction materials and equipment," said Ken Simonson, chief economist for the Associated General Contractors of America. "Construction costs are sure to rise further in 2026 as long as the current tariffs remain in place."
The numbers are stark. The producer price index for aluminum mill shapes surged 30.5% from December 2024 to December 2025—the largest annual increase since the supply chain crises of early 2022. Simonson pointed out the index has accelerated monthly since a 50% tariff on aluminum was imposed in June 2024. Similarly, the index for steel mill products, also under a 50% tariff, jumped 17% for the full year 2025, its steepest rise since 2022.
The cost wave is now reaching downstream equipment. "Those higher prices are now showing up as well in the cost of construction equipment and machinery," Simonson added. "That index rose 5.6% in the latest 12 months, the most in two years." He also warned that copper costs will "go even higher this year if the tariffs stay in place."
Voices from the Industry:
"We budgeted for some increase, but 30% on aluminum? That's a project-killer for some of our smaller commercial jobs. We're having to re-bid everything, and clients are getting sticker shock." — Marcus Chen, Project Manager at a mid-sized Texas general contractor.
"This is the predictable result of protectionist policy. It's a tax on American infrastructure and development. While some domestic producers benefit, the overall cost to the economy and to projects that communities need is severe and shortsighted." — David Reeves, Economic Policy Analyst at a Washington D.C. think tank.
"Finally, some policy that puts American manufacturing first! Yes, there's a short-term adjustment, but we're rebuilding critical capacity here. You can't have national security without industrial security. The cost is worth it." — Rebecca Forte, VP of a Pennsylvania-based steel fabricator.
"It's absolute madness. These tariffs are a blunt instrument that's hammering contractors and clients for political theater. The data center guys can absorb it, but for the rest of us? It's squeezing margins and forcing layoffs. They're sacrificing the entire construction ecosystem for a headline." — Jamie Rivera, Owner of a electrical subcontracting firm in Nevada.
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