Steel, copper and lumber prices surge ahead of August tariff hike
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Construction costs for nonresidential projects continued to rise in June, with the latest Producer Price Index showing a 0.2 percent monthly gain and a 2.3 percent year-over-year increase in input prices. This marks the steepest annual rise since February 2023. The acceleration comes as new tariffs on steel and aluminum begin reshaping contractor pricing and procurement strategies.
Aluminum mill shapes increased 6.3 percent from June 2024, while steel mill products rose 5.1 percent. Lumber and wood products added 4.8 percent. Fabricated structural metal for bridges climbed 22.5 percent, and rebar and joists rose 8.3 percent.
Contractors already contending with elevated labor costs and permitting delays now face renewed pressure on material inputs. With slim margins across many sectors, further price inflation complicates bidding strategies and delivery schedules.
Tariff escalations on metals and copper reshape industry cost baselines
On June 4, the federal government raised tariffs on steel and aluminum imports from 25 percent to 50 percent. A similar tariff on copper is set to begin August 1. Additional measures are under review, including levies on gypsum board, glass, and mechanical components.
While designed to support domestic production, these changes are affecting procurement lead times and cost assumptions. Many contractors report difficulty securing prices for materials on projects scheduled for late 2025 or beyond.
Estimates suggest these policies could add 1.5 to 2.5 percentage points to 2025 construction cost growth. Combined with a baseline escalation projection of 4.3 percent, the total annual increase could exceed 6.5 percent.
Inflation pressures intensify across sectors with uneven impact
The effects of tariffs are not limited to metals. Contractors also report higher costs in thermal insulation, concrete products, and electrical systems. Broader business expenses, such as freight, insurance, and borrowing, have also climbed, as reported by several national forecasting groups.
In response, firms are shortening bid validity windows and negotiating early procurement with clients. Some are embedding tariff adjustment clauses into contracts to reflect volatility in material inputs.
The industrial and infrastructure sectors appear more resilient, supported by long-term public funding and incentive frameworks. In contrast, commercial and residential markets show signs of hesitancy, with projects in design or preconstruction stages slowing amid uncertain pricing.
Developers grapple with delayed schedules and margin erosion
Despite record-setting nonresidential construction spending, $1.2 trillion as of early 2025, up 11.7 percent from the year before, many developers are reevaluating project viability.
Contractors report difficulty locking in subcontractor pricing beyond 45 days. That constraint is leading to staggered schedules, rolling scopes, and an increase in contingency allowances.
Trade groups warn that persistent volatility could dampen the benefits of recent federal stimulus programs and hinder investment in manufacturing and transportation infrastructure.
Firms are responding by adjusting contract terms, forward purchasing high-risk items, and building partnerships with suppliers. Some are also favoring design-build and construction management-at-risk delivery methods, which allow earlier collaboration on material decisions.
Contractors are advising clients to prioritize flexibility. That includes reviewing scope, timelines, and specifications, with an emphasis on materials offering more predictable costs or faster delivery.
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