Tariff Impacts Increase Construction Costs and Strain HVAC Projects
Key Highlights
- Tariffs are expected to raise construction material costs by around 9%, leading to a 4.6% increase in overall project costs.
- Most tariff-related cost increases (about 75%) are passed on to developers, contractors, and end users, affecting project budgets.
- Operational challenges include longer lead times, increased project uncertainty, and more complex procurement processes, especially during a period of high interest rates.
NEW YORK — Tariffs on imported construction materials are increasing project costs and adding new uncertainty for contractors, according to a new report from Cushman & Wakefield.
The analysis finds that current tariff policies are expected to raise construction material costs by about 9% compared to 2024 levels, resulting in an estimated 4.6% increase in total project costs.
For contractors, the impact is most visible in materials tied to HVAC and building systems, particularly metals. Steel, aluminum, and copper—key inputs for mechanical systems, piping, and equipment—are subject to tariffs of up to 50%, making them the primary drivers of cost escalation.
The report notes that roughly 40% of construction materials are imported, limiting the industry’s ability to avoid tariff exposure. As a result, about 75% of tariff-related cost increases are expected to be passed through to developers, contractors, and end users.
Beyond direct cost increases, tariffs are contributing to broader operational challenges, including:
- Increased project uncertainty and tighter margins;
- Longer lead times for materials and equipment; and
- More complex procurement and estimating processes.
These pressures come at a time when construction pipelines are already constrained by high interest rates and cautious lending, compounding risk for contractors managing project timelines and budgets.
The report also highlights that tariff impacts vary by project type. Copper-intensive facilities, such as data centers, face the highest cost exposure due to heavy reliance on tariffed materials.
To mitigate risk, Cushman & Wakefield advises contractors and developers to adjust procurement strategies, including sourcing alternative materials, leveraging prefabrication, and engaging project planning earlier to manage cost volatility.
For HVAC contractors, the findings reinforce the need to build flexibility into bids, closely monitor material pricing, and communicate cost changes with customers as tariff-driven pressures continue to influence project economics into 2026.