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Construction Costs in 2025: Tariffs, Uncertainty, and What Comes Next

By Thad Berkes

May 1, 2025
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How tariffs are influencing construction costs—and what you need to know.

The start of 2025 has introduced increased pricing volatility and reduced predictability due to changing tariffs and international trade policies. These shifts are significantly influencing material costs, supply chain timelines, and overall project budgets. The construction industry must stay ahead of these changes and remain agile for successful planning and execution.
Hand Holding Tablet over Floor Plan
Hand Holding Tablet over Floor Plan

How Tariffs Are Impacting Construction Costs in 2025

One of the most influential factors behind rising construction costs in 2025 is the evolving trade landscape. Recent trade actions have expanded in scope, affecting a wide array of building materials. Unlike previous years—when tariffs were more narrowly targeted—today’s policies are broader, touching industries from lumber to solar energy.

This has created a pricing environment where construction bids are valid for shorter periods, and cost planning requires greater agility. For firms operating under tight financial constraints or fixed funding, this uncertainty can add considerable pressure to project delivery timelines.

Lumber Prices Continue to Reflect Trade Strain

Softwood lumber, a key material for residential and light commercial construction, remains one of the most visibly impacted commodities. According to the National Association of Home Builders (NAHB), over 85% of U.S. softwood lumber imports come from Canada. Ongoing tariff adjustments in this area are contributing to elevated lumber prices and supply variability.

As a result, builders and developers are seeing tighter margins and reduced cost certainty—particularly in markets dependent on wood-frame construction. The NAHB warns that continued cost hikes could stall or derail projects nationwide, especially in building sectors where lumber plays a critical role.
Lumber Price Index Line Graph
Lumber Price Index Line Graph

Solar Panel Tariffs and the Cost of Clean Energy

Another area experiencing notable change is solar energy. The U.S. Department of Commerce recently proposed tariffs of up to 3,521% on solar imports from Southeast Asian countries such as Malaysia, Vietnam, Thailand, and Cambodia. In 2023, the U.S. imported nearly $12 billion in solar equipment from these nations.

While these policies aim to bolster domestic solar manufacturing in the long term, they are also making solar installations more expensive in the short term. For construction projects seeking to integrate renewable energy components, these tariffs may delay implementation or require reevaluation of energy strategies as we wait to see if U.S.-based manufacturers can rise to meet demand competitively.

Which Construction Sectors Are More Resilient in 2025?

Despite this volatility, some construction sectors remain stable. Mega-projects like data centers continue progressing as they are more insulated from short-term material cost swings. This is due to them being supported by global investment and their strategic long-term importance. Similarly, infrastructure projects backed by the Infrastructure Investment and Jobs Act are well-funded through at least 2026.

Public-sector construction—including healthcare, education, and public transit—is also holding steady, driven by stable state and local funding sources and strong demographic-driven demand.
Total Commercial Construction Spending Line Graph
Total Commercial Construction Spending Line Graph

What Can We Expect Going Forward?

Right now, we’re in a waiting game. While the full impact of these new and proposed tariffs will take several more months to play out, what’s clear is that pricing uncertainty is the new normal. Clients should prepare for price hikes, even if they can’t yet quantify them. Flexibility, contingency planning, and real-time communication between project stakeholders are more essential than ever.

As we move deeper into 2025, we’ll continue to monitor trade developments closely. With smart planning and cautious optimism, there’s still room to navigate through this tariff-fueled volatility.

Need help planning for cost uncertainty in your next build? Understanding these trends is essential for effective planning and budgeting in your next construction project. If you need a partner to help navigate through it all, consider our cost estimating services to leverage the expertise of Design Collaborative’s Chief Cost Estimator, Thad Berkes.

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