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According to industry sources, contractors are pricing jobs without a clear read on what their materials will ultimately cost in this environment.
The latest from the Trump administration adjustment of article 232 rateswhich were announced on April 2 and went into effect on Monday, increase taxes by up to 50% on goods made almost entirely of steel, aluminum or copper. Derivative products “substantially made” of steel, aluminum or copper incur a rate of 25%.
While the change is intended to strengthen domestic manufacturing capacity, contractors on the ground say the direct effects on construction projects will vary widely.
“From the initial review, the updated Section 232 requirements announced on April 2 may influence project pricing, but the full impact will take time to understand,” Tim Jed, supply chain leader at DPR Construction in Santa Clara, California, told Construction Dive. “In some cases, we expect little or no change in material prices. In others, costs are likely to increase.”
This variability is largely dependent on the amount of rate metal embedded in a product. Some power grid-related products may also see some price relief, especially when the steel, aluminum or copper content makes up a smaller portion of the total cost, Jed said.
Impacts on key construction materials
The most affected materials remain largely consistent previous rounds of rates.
Steel products such as structural steel, decks and studs have already come under sustained cost pressure. Copper and aluminum materials have also seen increases recently.
But some industry players downplay the overall effect on construction budgets, according to Barry Zekelman, executive chairman and CEO of Zekelman Industries, a Chicago-based steel pipe and pipe manufacturer.
“We don’t think these changes will significantly affect how contractors value jobs,” Zekelman said. “To keep things in perspective, the steel frame of a building is about 8% to 9% of the total cost of a typical commercial building. Steel frame materials are about 33% of that cost. So the total impact on a building won’t be significant even if prices go up.”
For mission-critical buildings, such as data center projects, the percentage of cost of the steel frame is significantly less than the typical commercial building, Zekelman said. Domestic supply can also help reduce the impact of tariffs on certain materials.
In other words, Zekelman doesn’t expect higher tariffs to delay or stop projects. Jed agrees, adding that contractors seem to be absorbing much of the pressure rather than delaying projects.
“Results vary by material and market, but in general, supply chain partners are working collaboratively to mitigate impacts and protect project outcomes,” Jed said. “From DPR’s perspective, overall demand remains healthy and the project portfolio remains strong.”
However, the Iran war could amplify price pressures in the coming months. The region is critical for aluminum and sulfur, used in nickel production, which may introduce renewed volatility for these materials.
“Recent disruptions in the Middle East are affecting freight routes and oil markets, creating logistical challenges that in some cases are extending delivery times and increasing transportation costs,” Jed said. “These dynamics reinforce the importance of proactive supply chain planning and real-time market visibility.”
And unlike other industries, construction companies can also struggle to minimize those impacts simply because of where the industry is along the supply chain, Jed said.
For example, a key provision known as the first sale rule allows importers to calculate tariffs based on the earliest transaction in a supply chain for a project, potentially reducing duties. But construction contracting, which often relies on bundled vendors and materials, makes that difficult to do, Jed said.
“The application of the first sale rule requires a high level of transparency and documentation at various levels of the supply chain, including traceability of goods and detailed breakdown of upstream costs,” said Jed. “Given how construction contracting typically works … it is difficult for construction-related operations to take advantage of this rule.”
In other words, contractors could face more direct exposure to these rate-related cost jumps than other sectors that can better optimize their supply chains.
