Economic analysis
Tariffs, Tensions, and the Cost Chain Reaction
The construction industry is facing additional new challenges as the U.S. government introduces a series of fresh tariffs.
On August 1, the Trump administration announced higher tariffs on several key construction materials. In Q2, tariffs on certain steel and aluminum products doubled from 25% to 50%. Imports from the United Kingdom will continue to face the original 25% rate. A 50% tariff now applies to all semi-finished copper products, such as pipe, plate, wiring, and tubing. Finished copper goods, copper scrap, and copper ore are not affected. Lumber now faces a 10% tariff as well.
Several countries now face reciprocal tariffs. All countries face at least a 10% base rate, unless covered by a U.S. trade agreement. Some countries, like those in the European Union, are benefiting from trade deals and facing lower tariff rates.
The direct impact on prices is still unclear. However, futures markets have already responded. Prices for metals like copper, steel, and aluminum are falling. Futures contracts, agreements to deliver goods later at a set price, reflect investor expectations and often predict changes in current (“spot”) prices. Between July 30 and 31, copper futures dropped 22% and remained at that level. Steel futures fell 3%, and aluminum declined 2%. As of June, spot prices for iron and steel dropped 3.85% from the previous month, while aluminum fell 2.43%.⁵ This could help clients save money in the short term. But it is still not clear how it will affect overall prices. Clients should watch market trends and think about changing procurement strategies. For example, they might lock in prices early or renegotiate supplier contracts to take advantage of favorable conditions. These changes can help lower costs, but they also introduce volatility that can affect budgets and timelines. To keep costs steady and projects on track, it is important to stay flexible and act early when making buying decisions.
Contractors and developers want more clarity. Many are watching how the new tariffs will play out. We expect tariffs to contribute to material price volatility. The policies target both countries and materials and are likely to raise the cost of supplies. As talks continue, the system may grow more complex. Conditions remain unstable, and more changes could come soon.
To stay ahead of this curve, project teams need to plan proactively. Early supplier engagement will be critical, not just to secure interest and capacity, but to minimise the risk of delays and ensure the strongest possible delivery response.