Global Tariffs Raise CRE Construction Costs and Risks

Tariff Volatility Clouds CRE Pricing

The White House announced sweeping new tariffs on imports from more than 80 countries. The administration aims to replace earlier levies that were set to expire.

According to Bisnow, the action reflects President Trump’s continuing overhaul of US trade policy. The administration justified the tariffs under Section 301 of the Trade Act of 1974.

Newly taxed products include building materials, steel inputs, electrical equipment, and manufactured components. These products support many CRE, data center, and industrial developments. With tariffs at 10% or 12.5%, US construction costs could climb further.

Earlier in the administration, officials introduced tariffs under different legal authorities. However, the Supreme Court rejected Trump’s previous powers, prompting officials to pursue a new legal rationale.

Meanwhile, persistent inflation continues to pressure the CRE industry. Supply chain disruptions and labor costs have challenged project underwriting since 2022.

The Details

The tariffs took effect immediately and target countries the US says inadequately police forced labor practices. Key affected partners include Canada, the EU, Australia, Brazil, China, Singapore, and South Korea.

Canada already maintains its own ban on forced labor imports. Still, the new US tariffs cover many Canadian products.

According to The New York Times, Malaysia, Taiwan, Indonesia, and India face a 10% tariff. Australia, Brazil, and several other countries face a 12.5% levy.

Certain categories, including oil, gas, and fertilizer, remain exempt. However, many goods feeding US construction pipelines still face tariffs.

Mexico also falls under the policy. However, goods protected by the United States-Mexico-Canada Agreement remain unaffected. Products covered by other national security tariffs also avoid the new levies.

US Trade Representative Jamieson Greer cited the need for greater global parity in forced labor laws. However, opposition from Australia and South Korea could lead to further litigation or negotiations.

CRE Construction Costs Under Pressure

The new levies could deepen challenges already confronting CRE investors and developers. Since mid-2025, rising material and equipment costs have complicated underwriting.

According to Globe St., these pressures have affected office, industrial, and mixed-use developments. Constant tariff changes also make construction budgets harder to lock.

Earlier tariff uncertainty had already complicated CRE planning, as developers struggled with shifting material prices and unpredictable project costs.

Some project sponsors reported material price increases between 8% and 15% after earlier tariff rounds. Those increases can quickly disrupt development budgets and projected returns.

Broader uncertainty could also discourage future development pipelines. Sectors that rely heavily on imported components face particularly significant exposure.

Large infrastructure, logistics, and data center projects could experience larger cost increases. Developers could also face longer construction schedules as procurement becomes more complicated.

Some product categories remain exempt from the tariffs. However, crucial inputs like steel and electrical equipment rarely avoid trade scrutiny.

Why It Matters

The latest tariffs intensify an already uncertain environment for commercial real estate. US construction material costs have increased 38% since 2020.

National Association of Home Builders data attributes those increases to several pressures. Price shocks, shipping disruptions, and labor shortages have all contributed.

The tariffs add another layer of financial risk for project sponsors, lenders, and REITs. These groups depend heavily on predictable input prices when evaluating projects.

Greater pricing uncertainty can complicate deals across gateway and secondary markets. It can also weaken confidence in early development budgets and projected returns.

Most importantly, the tariffs cover many of America’s largest trading partners. Canada, the European Union, and Australia remain deeply connected to US construction supply chains.

Their goods support HVAC systems, wiring, prefabricated structures, and other essential project components. Disruptions across these categories could affect projects well beyond direct material costs.

The United Nations reported 27.6M people living in forced labor worldwide during 2021. That issue forms a central part of the administration’s legal rationale.

The approach could prove more durable in court than some previous tariff justifications. Still, CRE faces growing exposure to potential trade disruptions.

More countries could face additional levies after an active US investigation into alleged global overproduction. That possibility adds uncertainty to procurement and long-term project planning.

The White House argues that the policy promotes more ethical sourcing practices. However, US CRE could face increasingly expensive and unpredictable development pipelines.

Developers considering groundbreakings now face difficult choices, especially within tight-margin sectors. Industrial and specialty logistics projects could experience particularly strong pressure.

Sponsors may delay projects, renegotiate contracts, or secure alternative suppliers. Others could pass higher costs to tenants or investors where market conditions allow.

What’s Next

The Office of the US Trade Representative has started investigating another 16 countries. Together, those countries account for roughly 70% of US imports.

That investigation suggests the latest tariff escalation may not represent the final round. Additional countries or product categories could eventually face new levies.

CRE professionals should closely watch changes affecting products, suppliers, and trading partners. They should also expect continued volatility in construction bids.

International partners could challenge US policies through negotiations or legal action. Some countries could also respond with retaliatory tariffs.

For now, developers can adjust procurement strategies and build larger contingencies into project budgets. Stronger supply chain planning can also reduce unexpected disruptions.

Careful risk management will remain essential as tariff policies evolve. Developers that secure pricing flexibility could better protect project profitability.