The commercial construction sector is bracing for potential disruptions as President Donald Trump's new tariffs take effect. These measures, impacting over 180 countries, include a 10% baseline tariff and additional reciprocal rates on specific nations. Key materials like steel, aluminum, lumber, and copper are exempt from the latter but have already seen significant price hikes due to earlier levies. Experts warn that rising material costs and labor constraints could slow down construction investments, particularly affecting privately funded nonresidential projects.

President Trump's recent announcement of fresh tariffs has sent ripples through the construction industry. On Wednesday, he unveiled a 10% standard tariff alongside selective reciprocal rates, such as an extra 34% on Chinese imports and 20% on EU goods. While critical materials remain exempt from these reciprocal tariffs, existing duties—like the 25% on steel and aluminum since March 12—continue to strain budgets. According to Anirban Basu, chief economist at Associated Builders and Contractors, material prices are expected to escalate further in the coming months.

Tim Jed, supply chain leader at DPR Construction, noted that while domestically sourced products like concrete and gypsum might not be directly affected, indirect impacts could still arise. "Even if materials are produced locally, tariffs may alter domestic pricing or lead times," Jed explained. The uncertainty surrounding future spending is another concern, with Jeannine Cataldi from S&P Global Market Intelligence pointing out that nonresidential construction, especially private ventures, may experience slowdowns. Although current projects are likely to proceed, future investments remain precarious.

Labor challenges add another layer of complexity. Economists fear that reciprocal tariffs could lead to layoffs within the construction sector, complicating efforts to maintain economic growth. Michael Guckes, chief economist at ConstructConnect, highlighted concerns about labor shortages exacerbated by stricter immigration policies. Meanwhile, Ken Simonson of the Associated General Contractors of America emphasized that despite strong momentum in certain sectors, overall activity remains vulnerable to tariff-related pressures. Copper prices, crucial for data center construction, have surged dramatically this year.

While tariffs aim to level the playing field with trading partners, their immediate implementation poses risks for contractors operating under fixed-price contracts without secured material costs. Companies facing higher expenses or losing export sales due to retaliatory measures will likely cut back on spending, including construction projects. To navigate this volatile landscape, experts advise careful cash flow management and strategic decision-making tailored to individual projects rather than blanket strategies.