Tariffs and Supply Woes Drive Metal Prices Higher, Squeezing U.S. Construction Industry
Metal costs soar on tariffs as construction spending falters; trade groups urge Congress to act
SHOP TALK: The Associated General Contractors of America (AGC) and Associated Builders and Contractors (ABC) both report rising material costs and declining construction spending, urging policy action from Congress.
Construction firms are facing a one-two punch: surging costs for metals like aluminum, steel, and copper, paired with a drop-off in nonresidential building activity, according to new data and analysis from two of the industry's largest trade organizations.
The price of key construction materials jumped again in January, led by steep increases in aluminum and steel – up 33% and 20.7% year-over-year, respectively – amid tariffs that industry leaders say are emboldening domestic producers to raise prices. Copper and brass prices also climbed 15.7% over the same period. The producer price index for nonresidential construction inputs rose 2.9% over the past year, according to the Associated General Contractors of America (AGC).
“Steep tariffs on imported metals and products are clearly enabling U.S. sellers to push up costs,” said Ken Simonson, AGC’s chief economist. “Providing domestic producers with greater certainty about future demand should encourage greater production and, ultimately, lower prices.”
A similar warning came from the Associated Builders and Contractors (ABC), which reported a 0.7% jump in input prices for all construction in January alone. Nonresidential input prices were up 0.6% for the month, and 2.9% from a year ago. “While this sharp monthly rise can be traced to significant increases in prices for tariff-affected products like copper wire and cable, iron and steel, and industrial controls equipment, aggregate input price escalation is not particularly concerning right now,” said ABC Chief Economist Anirban Basu. “Trade policy may continue to put upward pressure on certain input prices ... especially those subject to the large Section 232 tariffs.”
At the same time, construction spending is losing steam. National nonresidential spending dropped 0.6% in December, with declines in 12 out of 16 nonresidential subcategories, according to an ABC analysis of U.S. Census Bureau data. Private nonresidential spending fell 0.7% for the month and public nonresidential by 0.4%. Manufacturing construction – a segment that had been booming – has fallen nearly 16% since peaking in August 2024. “Given trade policy uncertainty and the waning effects of the CHIPS Act, manufacturing-related spending will likely continue to decline over the next several quarters,” Basu said.
Public construction saw modest growth in 2025, up 3.4%, but private nonresidential spending is now down 1.8% year over year. The ABC’s Construction Backlog Indicator – a measure of how much work contractors have booked – fell to a four-year low in January, reflecting contractors’ uncertainty.
The AGC and ABC both say the solution is greater policy certainty around federal infrastructure and transportation funding. The AGC has launched a campaign, “America’s Moving Forward,” urging Congress to renew the surface transportation bill before it expires in September. “Passing the surface transportation bill – the single largest federal construction measure – on time will give domestic suppliers the certainty they need to boost production and offset the impacts of tariffs,” said AGC CEO Jeffrey D. Shoaf.
Contractors may be feeling some cautious optimism, with ABC’s Construction Confidence Index showing a slight improvement in profit margin expectations in January. Still, sentiment remains lower than a year ago, and many in the industry see the coming months as a test of whether Washington will provide the predictability the sector needs.
For more industry economic analysis, visit agc.org and abc.org/economics.
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