Trump's tariffs are starting to bite American builders

• President Donald Trump has imposed a flurry of tariffs that have driven up costs.
• Real estate developers have been hit with sticker shock on steel orders, which have risen 20%.
• Despite widespread optimism at the beginning of Trump's second term, developers have grown worried.

President Donald Trump has promised to power the economy by imposing tariffs on foreign goods and materials.

Instead, the duties are heaping new costs on commercial real estate development projects in the US as prices rise sharply for core building components like steel, aluminum, copper, and tiling.

Joseph Taylor, the CEO of Matrix Development, a New Jersey-based warehouse developer, said that his company recently ran into tariff impacts on the steel it is buying to erect a warehouse in Newark, New Jersey.

"I can tell you steel is up 8-10%" for the project, Taylor said, noting that the increases had driven up the planned building's costs by about $2 million.

Another developer planning a more than $100 million warehouse outside of Washington, DC, meanwhile, said that Nucor, a North Carolina-based steel manufacturer that he had tapped to make the structural beams for the project, alerted him in recent days that prices were rising 15% on his $12 million order.

The developer was able to lock in his original price because he had made a reservation for the steel, but he now anticipates the project's construction costs will rise by about 10% overall because of the impact of tariffs on other materials, such as steel rebar in the project's concrete foundation, as well as growing charges for insulation and roofing.

The developer said that the increases would eat into his forecast returns for the development.

"It's going to be harder to get new projects going," the developer said.

The person did not want to be identified because he said he is negotiating with other suppliers and didn't want to tip his hand on where he anticipates price increases.

The prices of commodity goods like metals and common fabricated products like rebar and steel wall framing that are used in real estate development are strongly affected by global markets, experts say. The tariffs have had the effect of pushing up costs, even for goods made domestically.

"What you did is you hamper competition, so the domestic people simply just raised their price where they can," said Dain Drake, a principal at DeSimone Consulting Engineering, whose focus includes sourcing structural steel for commercial development.

The Trump administration placed a 25% duty on foreign made steel and aluminum imports in February and the trade barriers went into effect on March 12. Trump has explored tariffs on other important building materials, including copper, which is widely used in plumbing and electrical systems.

The increases haven't registered yet in much of the data that tracks materials costs. But experts say builders are beginning to experience sticker shock.

Drake said that quotes for fabricated steel he is helping to procure for the expansion of a manufacturing plant in the Houston area have risen 20% recently — in line with steel increases he has seen across the market. The contractor, which will have to pass the cost onto the customer, was surprised and "not happy," he said, when he reported the new quote.

Drake said that such escalations could impact whether projects proceed.

"It hasn't shut things down yet, but that conversation's going to manifest," he said.

More expensive ceiling tiles and lighting systems

The charges have been felt not just in ground-up development but also in the multi-billion dollar industry for interior work and renovations.

Richard Jantz, an executive at Cushman & Wakefield who leads its project and development services team in the tri-state region, said that a large office tenant recently put a roughly $20 million renovation of a space it occupies in Manhattan on hold because of cost escalations that coincided with the tariffs.

The duties have cascaded through the supply chain, Jantz said, raising the price of items like ceiling and acoustic tiles, which often use China-made fiberglass, or lighting systems, which can have internationally sourced components. The Trump administration has imposed a 20% tariff on imports from China.

Ceiling tile systems also employ steel or aluminum grids to suspend them, which have become more expensive.

Jantz said that construction costs have risen by about 3% on average annually in New York City for decades. This year he forecasts increases of around 5%.

"That is largely based on the tariffs and a little bit of greedflation that we're seeing," Jantz said, referring to domestic manufacturers and suppliers who have been opportunistic by raising prices because foreign competition has grown more expensive.

The higher costs have also had an impact on the construction of apartments, as Business Insider reported in February.

A lack of clarity on tariffs

Trump's return for a second term in the White House created widespread optimism across the commercial real estate industry. But a turbulent month and a half in office has rattled investors.

Trump has upended global alliances by placing tariffs on close US trading partners, including Mexico, Canada, and Europe. As major stock indexes have tumbled as a result of his policies, Trump appeared to suggest that he was willing to accept a contraction of US growth to meet his objectives, telling Fox News that the country may endure a "period of transition."

He has also zig-zagged on major policy announcements that have disoriented executives and raised uncertainty in the business sector. Trump's administration, for instance, announced a 50% tariff on Canadian steel on March 11, only to call off the sweeping action later in the day.

Construction experts say that such whiplash moves encourage developers to wait on the sidelines in the hope that other tariff actions and charges will also be pulled back.

"The lack of clarity on the tariffs and the resulting impact of those tariffs, it's driving uncertainty," said Joseph Mizzi, the president of Sciame Construction. "If someone has to guess with a lack of certainty, they're typically going to — in the contracting world — guess in a more conservative way."

Mizzi said that he and other contracting executives he speaks with have become concerned about the situation recently. He said the industry had expected an upswing in construction in 2025 after a few years of diminished activity in the sector that was brought on, in part, as a result of higher interest rates.

"We lay in bed at night thinking about things that might happen," Mizzi said. "So yeah, it's on our radar for sure."