Navigating the Impact of Steel and Aluminum Tariffs on the Construction Industry

I wanted to take a moment to speak to something that has been affecting all of us in the commercial construction industry lately—and that is the recently announced tariffs on steel and aluminum imports. If you’re like me, you’ve probably noticed the ripple effects on your projects already.

Earlier this month, President Trump reinstated a 25% tariff on steel and aluminum imports, aiming to protect and increase domestic production. In theory, that sounds like a positive move for American manufacturers, but for those of us in commercial real estate—whether it’s multifamily, hospitality, student housing, or high-end developments—this means costs are going up.

We were already seeing annual increases in construction costs year-over-year. Now, with steel and aluminum prices expected to jump even higher, I’m hearing concerns from developers, builders, and project owners about how to keep projects on track without cutting into margins or delaying timelines, – potential solutions to which I felt compelled to share.

According to the Associated General Contractors of America, “Steel is a more significant input than lumber for most nonresidential contractors. With steel prices continuing to set new highs, contractors remain behind the curve in regard to passing on costs.” (enr.com)

For those working on multifamily conversions, ground-up hospitality projects, student housing developments, and even luxury high-rises, this means tighter proformas, potential budget overruns, and tougher negotiations with lenders and investors.

As I mentioned, I’ve been talking to developers, builders, and investors who are already shifting their strategies to stay ahead of these cost increases.

Here are a few things I’m seeing work:

• Pre-purchasing materials – Locking in steel and aluminum pricing now before costs rise further can be a game-changer, especially for large-scale projects.
• Using escalation clauses in contracts – If you haven’t already, negotiating cost escalation clauses into your GC and supplier contracts can help protect against unexpected spikes. Kenneth E. Rubinstein, an expert on construction law, advises, “it’s a good idea to seek protection in case short-term price spikes return.” (enr.com)
• Exploring material alternatives – Some developers are looking at alternative materials that aren’t hit as hard by tariffs. For example, certain prefab and modular solutions could offset steel price increases in some projects.
• Reassessing underwriting and financing – Investors and lenders are paying closer attention to these rising costs, so having a clear strategy on how you’re mitigating these risks will be crucial for securing funding and keeping deals moving forward.

This isn’t the first time the commercial construction industry has had to adapt, and it won’t be the last. The smartest developers, builders, and project stakeholders are staying proactive adjusting their sourcing strategies, negotiating smarter contracts, and keeping a close eye on market shifts.

If you are deploying strategies that would compliment this list, I would welcome the opportunity to hear about them. I hope you found this insight to be beneficial.