The impact of Trump’s tariff policies on the global construction market

When President Donald Trump first took office in January 2017, one of his key campaign promises was to prioritise "America First" policies, including the imposition of tariffs on imported goods to protect domestic industries and reduce trade deficits. He now looks set to do the same in 2025 and for industries like construction - a sector heavily reliant on the global supply chain – we have to ask the question - will this cause significant disruptions and transformations, writes John Ridgeway?

The short answer is yes, because we have experienced what tariffs can do and have a good idea of what it will mean for the construction industry across the world. There is every reason to believe that President Trump will look to repeat the same policies in 2024 – because to use a UK phrase – he does have previous – and we know it will immediately affect key construction materials like steel, aluminium and timber.

For those unfamiliar with tariffs, it is a tax imposed by a government on imported goods. The primary objectives of tariffs are to protect domestic industries by making imported goods more expensive. This in turn is meant to encourage consumers to purchase domestic alternatives. Tariffs can also provide a significant source of government income and are often used as a tool to reduce trade deficits by discouraging imports.

Under President Trump’s first term, tariffs were positioned as a mechanism to revive domestic manufacturing and protect industries like steel and aluminium, which he argued had been undermined by unfair trade practices, particularly from countries like China. That said, tariffs imposed during his first term are thought to have done little for the US economy.

The construction industry relies on a variety of materials sourced globally. Tariffs on key materials could significantly affect costs and project feasibility. Some of the most critical materials subject to tariffs could include steel and aluminium. In 2018, the Trump administration imposed a 25% tariff on steel imports and a 10% tariff on aluminium under Section 232 of the Trade Expansion Act, citing national security concerns. These materials are essential for constructing buildings, bridges and infrastructure projects.

Tariffs on softwood timber from Canada, one of the largest suppliers to the U.S., were also introduced to protect American timber producers. Timber is a key component in residential and commercial construction. This time we are also likely to see tariffs on machinery and equipment. Many construction firms rely on imported machinery and tools. Tariffs on industrial equipment could raise costs for construction firms.

Immediate effects of tariffs

What is certain is that tariffs will directly raise the price of imported goods. In the case of steel and aluminium, the 25% and 10% tariffs led to price hikes for these materials, affecting the cost of everything from structural beams to HVAC systems. Higher material costs translate in turn, to increased project budgets, which can deter investment in new construction projects.

We know that many construction companies in the US operate with just-in-time supply chains, sourcing materials from multiple countries. Tariffs will disrupt these networks, forcing companies to seek alternative suppliers or absorb higher costs. Rising costs and uncertainty around material availability can also lead to delays in project timelines. In some cases, projects may be cancelled altogether if budgets become unsustainable. Ultimately, the increased costs of construction will be passed down to end users, affecting affordability in residential, commercial and infrastructure markets.

If tariffs are imposed by the US, their impacts will be felt across the global market. Countries that rely on exporting materials to the U.S., such as Canada, China and the European Union, face reduced demand and economic strain. Surplus materials in these countries may possibly lead to price drops locally, but disrupt global pricing dynamics.

Tariffs often lead to retaliatory measures. For example, in response to U.S. tariffs, China imposed its own on American goods, affecting industries that support construction, such as machinery manufacturing. Trade wars simply create uncertainty, making it difficult for construction firms to plan for the long term.

There are opportunities, however. Countries not directly impacted by tariffs may position themselves as alternative suppliers. For instance, Southeast Asian countries could emerge as key players in the steel and aluminium markets, reshaping global trade routes.

Long-term implications

Tariffs also incentivise domestic industries to ramp up production. In the U.S., this could lead to greater investment in steel and aluminium manufacturing facilities. However, establishing or expanding production capacity takes time and the initial costs may be higher than relying on imports.

To offset these higher costs, construction firms may invest in technology to improve efficiency. For example, modular construction and 3D printing could reduce reliance on traditional materials. Companies may also diversify their supply chains to minimise the impact of tariffs. This could involve sourcing materials from multiple countries or increasing reliance on domestic suppliers. Furthermore, rising costs for traditional materials like steel and aluminium could accelerate the adoption of sustainable alternatives, such as engineered timber or recycled materials.

So, what happened when the Trump administration imposed tariffs the last time? In the US domestic steel producers saw increased demand following the implementation of tariffs, but at the cost of higher prices for construction firms. Infrastructure projects funded by public-private partnerships faced budgetary challenges due to rising material costs.

As a major exporter of timber and steel to the U.S., Canada faced reduced demand and retaliatory tariffs. Canadian construction firms, however, benefited from a surplus of materials, leading to lower domestic prices, but exporters suffered significant losses.

China, one of the world’s largest steel producers, faced reduced exports to the US, but strengthened trade ties with other countries in Asia and Europe. The Chinese construction market remained resilient, using surplus materials for domestic infrastructure projects.

European steel and aluminium producers faced a decline in U.S. exports, but found opportunities in emerging markets. Construction firms in the EU focused on efficiency and innovation to offset rising costs.

All this means that construction firms should build flexibility into their budgets and timelines to account for potential cost increases. Hedging strategies, such as locking in prices with suppliers, can mitigate risks. Advanced technologies, such as Building Information Modelling (BIM) and automated manufacturing, can also help optimise resource use and reduce waste.

Building stronger relationships with suppliers will further ensure access to materials and competitive pricing. Joint ventures with domestic producers can secure long-term supply agreements. In addition, the adoption of green building materials and practices can reduce reliance on tariffed goods while aligning with global sustainability goals.

Without doubt, President Trump’s proposed and enacted tariffs have far-reaching implications for the global construction market. While the intended goal of protecting domestic industries may yield benefits for some, the broader impact includes increased costs, supply chain disruptions and shifts in trade relationships.

To thrive in this new landscape, construction firms must embrace adaptability, innovation, and sustainability. By rethinking procurement strategies, investing in technology and exploring alternative materials, the industry can mitigate the challenges posed by tariffs and continue to build a resilient future. The global construction market has always been defined by its ability to adapt to change. As tariffs reshape the industry, this adaptability will be more critical than ever.