Tariffs and Immigration Policy Changes Driving Up Construction Costs
The U.S. construction industry is facing cost pressures due to recent changes in both tariffs and immigration policies. These developments are reshaping the landscape for contractors, developers, and home-buyers, as material prices surge and labor shortages intensify. We have already seen bids coming back 10% above anticipated projections from January 2025. Since project costs in our area, tend to be approximately 6o% labor vs 40% materials– this combination of factors may be felt for months- if not years.
One of the most direct influences on construction costs has been the imposition of tariffs on imported building materials. Tariffs on steel and aluminum, initiated in recent months as part of broader trade policy shifts, have led to sharp increases in material prices. For example, the cost of structural steel — a core material in commercial and residential construction — has risen by double digits since the introduction of the tariffs. These increased costs are typically passed down the supply chain, inflating project budgets and, ultimately, construction prices.
Similarly, tariffs on goods like lumber from Canada have contributed to rising costs in the residential sector. Lumber prices are highly sensitive to trade policy, and fluctuations can significantly impact homebuilding. Although some tariffs have been adjusted or relaxed, market uncertainty continues to deter investment and drive up costs.
On the labor side, immigration policy changes have had a profound impact. . The construction industry has historically relied heavily on immigrant labor, particularly in lower-skilled segments such as framing, roofing, and masonry. Stricter immigration enforcement and reductions in legal immigration pathways have reduced the available workforce, making it harder for construction firms to staff their projects adequately.
This labor shortage not only increases labor costs due to heightened competition for workers, but also causes project delays, which further inflate costs through extended timelines and increased overhead. In some regions, the labor gap has reached critical levels, forcing firms to turn down projects or scale back operations.
In summary, the intersection of trade and immigration policy is playing a major role in the rising cost of construction. Addressing these issues may require a balanced approach that fosters both domestic industry and workforce growth while maintaining access to global supply chains and skilled labor. Without meaningful policy adjustments, the affordability and feasibility of construction projects — from homes to infrastructure — will continue to be strained.
