Is there a light at the end of the tariff tunnel? - by Kenneth F. Wille, PE

Import tariffs are nothing new. Yet, since the Trump administration introduced sweeping trade measures, the real estate sector has been forced to navigate an environment where the cost of materials is as much a function of geopolitics as it is of supply and demand. One would assume that as the year has progressed, forecasting would become easier. Instead, the lesson has been the opposite: uncertainty is the only constant. And so the question lingers - does a light exist at the end of the tariff tunnel?

Where We Are Now

Construction remains among the industries most exposed to tariffs. A June 2025 Oxford Economics study placed the effective tariff rate on U.S. construction imports at 27.7%, up from 19.2% a few months earlier. Construction inputs such as wood, steel, aluminum, and copper form the backbone of every project, meaning tariff shocks reverberate throughout the sector. The current dynamics reveal several important trends:

• Steel and aluminum costs have surged since tariffs were lifted to 50%, placing stress on contractors.

• Domestic prices increasingly mirror tariff pressure, though pass-through to contracts often lags.

• Contingencies and escalation clauses are now standard features in construction contracts.

• Suppliers sometimes absorb costs temporarily to preserve client relationships, masking the true long-term impact.

Imported inputs now represent a vulnerability across the entire construction supply chain. Key tariff rates shaping the market include:

• Steel 25% and Aluminum 10%.

• China: 25% on many building inputs, 50% on solar modules, with a pathway to 100% by 2026.

• Canadian lumber: 21%.

• 47% of imported aluminum and 22% of imported steel feed into U.S. manufacturing, intensifying indirect costs.

Outlook Through Year-End

Looking toward the close of 2025, the policy landscape suggests stability at elevated levels rather than sudden escalation, meaning merely a continuation of heightened costs. Monetary policy and global currency markets add further layers of complexity.

Possible developments include:

• Potential 30 – 40% rebar duties on imports from Algeria, Bulgaria, Egypt, and Vietnam.

• Expected Federal Reserve rate cuts (at least 25 basis points), which may stimulate demand but also influence construction financing costs.

• A softer U.S. dollar, which could raise landed import costs and magnify tariff pressures.

• Steel and aluminum tariffs at 50% (Section 232) remain locked in under presidential proclamation.

• China’s tariff truce extended to November 10, 2025 - likely to see short extensions or selective tightening rather than collapse.

For developers, the near-term consequence is straightforward: metals-heavy packages such as structural steel, façade systems, and mechanical equipment will remain costlier than in prior years. Bid strategies must therefore account for both the elevated price environment and the continued use of escalation clauses.

12-Month Outlook

Over the next year, the outlook remains defined by persistence rather than resolution. The U.S. construction industry should anticipate tariffs at current levels barring extraordinary diplomatic breakthroughs. Internationally, the rollout of the EU’s Carbon Border Adjustment Mechanism (CBAM) introduces an additional layer of cost complexity, especially for cross-border developers.

Key expectations:

• Section 232 tariffs at 50% on steel and aluminum are likely to continue well into 2026.

• Exports to the EU will be subject to CBAM costs on cement, iron, steel, and aluminum, requiring carbon documentation (EPDs, mill certifications).

• China’s tariff truce may be extended again or partially narrowed, but wholesale increases are unlikely in the immediate term.

• Some partner nations could see carve-outs, though contractors are advised to budget conservatively using baseline tariff rates.

• Metals-intensive scopes - frames, rebar, curtainwall, elevators, and switchgear - will remain expensive with longer lead times.

• Contract repricing under the 50% Section 232 regime ensures pass-through will persist as legacy contracts expire.

• CBAM could accelerate the adoption of low-carbon alternatives in European projects, reshaping procurement strategies.

The reality is that tariffs are no longer temporary disruptions - they are structural features of the construction landscape. For developers, investors, and contractors, adaptability is no longer optional. It is the defining skill for navigating the next cycle. Tariffs have transformed from a short-term trade dispute into a long-term operating condition for the construction sector. Stakeholders should approach 2026 with clear-eyed pragmatism: budget conservatively, negotiate contracts with flexibility, and prepare for volatility as the new normal. If relief comes, it will be incremental and partial. The industry’s resilience, not policy shifts, will determine whether the light at the end of the tunnel becomes visible. My bet is on the industry.

Kenneth F. Wille, PE is president and CEO of KOW Building Consultants, Manhattan, N.Y