For a moment, real estate developers exhaled. Then came the fine print.<\/p>\n
On Friday,\u00a0the White House slapped a 50% tariff on finished copper goods<\/a>\u00a0\u2014 the pipes, wires and fittings critical to U.S. construction.<\/p>\n \n Bisnow\/created with assistance from ChatGPT\n <\/p>\n \n Copper tariffs are expected to significantly impact construction material prices.\n <\/p>\n That distinction matters.<\/p>\n While spot prices for raw copper dropped to $4.33 per pound<\/a>, the tariff doesn\u2019t touch the raw metal. And pricing for\u00a0the value-added copper products builders actually use has jumped 40% in some cases just this year.<\/p>\n That strikes the guts of every jobsite from San Francisco to Washington, D.C., where even minor cost spikes can blow through contingency budgets and punch holes in pro formas, the financial blueprints developers rely on to test feasibility and ensure returns.<\/p>\n Developers and construction experts who spoke to Bisnow this week said they are already battling labor costs, soaring insurance expenses\u00a0and higher-for-longer interest rates<\/a>, and the new copper duties pile on additional financial friction<\/a> just as hopes were rising for price stability.<\/p>\n \u201cIt\u2019s just one more factor to keep in mind,\u201d said Greg Kraut<\/a>, a New York developer and CEO of KPG Funds<\/a>. \u201cWhen \u2018Liberation Day\u2019 hit, we couldn\u2019t sell any of the buildings we wanted to because no one knew how to model for tariffs. Now, with rising material costs and volatility, it\u2019s the same story \u2014 and I guess that now includes copper, too.\u201d<\/p>\n The Fine Print That Packs A Punch<\/p>\n The new duty stems from a Section 232 investigation launched in February<\/a>, which deemed U.S. reliance on foreign copper \u2014 particularly from Chile, Canada and Mexico, which combined shipped the U.S. more than $10B worth in 2024<\/a> \u2014 a national security threat.<\/p>\n The 50% tariff effective Aug. 1 applies to semifinished copper goods and derivatives, stacking atop existing tariffs. Commerce Secretary Howard Lutnick<\/a> has 90 days to review whether more copper-based imports should be included under the Trump administration\u2019s trade initiative<\/a>.<\/p>\n About 84% of the intermediate copper products used in U.S. construction \u2014 including rolled, drawn, extruded and alloyed components \u2014 are already sourced domestically, according to internal JLL<\/a> estimates shared with Bisnow. While that may blunt the immediate impact, analysts expect demand-driven pressure to ripple through the supply chain as buyers shift away from imports.<\/p>\n Prices for copper products have already spiked 15% to 30% over the past year as builders anticipated tariffs, said Dan Doherty, senior director of estimating at Shawmut Design and Construction<\/a>. That includes a 40% surge in common diameters of copper pipe and a 14% to 17% increase for copper wires since the start of 2025, according to a Skanska<\/a> report.<\/p>\n That is only going to get worse with the new liens, spurring builders to get creative.\u00a0<\/p>\n \u201cSuppliers have built inventory and adjusted pricing \u2026 [and] where permitted, we\u2019re using cost-effective alternatives like plastic plumbing pipe in multifamily projects and aluminum electrical wiring in commercial projects,\u201d Doherty said.\u00a0<\/p>\n But those substitutions have limits.<\/p>\n In healthcare, data centers and food service \u2014 where conductivity, fire resistance and durability are nonnegotiable \u2014 copper is difficult to replace. Even in projects that pivot to alternatives, HVAC systems, fixtures and sensors still rely on embedded copper, keeping cost exposure high.<\/p>\n When Fixed Prices Break<\/p>\n To hedge against volatility, Florida Construction Specialists stopped offering fixed-price contracts after the pandemic.<\/p>\n \u201cWe don’t give you a fixed price and lock ourselves in,\u201d co-founder Frank Bragano said. \u201cNo way, Jose. It’s cost-plus, period. It’s too fluctuating. I don’t have a crystal ball, and I’m not taking the gamble.\u201d<\/p>\n He is in talks with HVAC and electrical subcontractors about pricing on an $11M project in central Florida, but the impact of the copper tariff on that budget remains unclear.<\/p>\n Who will ultimately foot the bill is less hazy.<\/p>\n \u201cI get the tariffs, I understand the theory behind it, but does the consumer get a raise?\u201d Bragano said.<\/p>\n \u201cThe tariffs will affect those components, which will get passed on to the actual subcontractors \u2026 that will then get passed on to the actual builders, and that will get passed on to the consumer,\u201d he added. \u201cAt the end of the day, it’s just flowing down the hill, and it always goes back to the consumer.\u201d<\/p>\n That cascading pressure has developers on edge. And tariffs aren\u2019t the only inflationary force. On top of high interest rates, labor shortages and insurance hikes, global shipping costs are climbing fast. The Baltic Dry Index, a benchmark for dry bulk shipping rates, has jumped nearly 270% since January, driven by fuel costs and tighter vessel supply, JLL reports.<\/p>\n \u201cMost experienced developers have already built contingencies into their pro formas to account for volatility in material costs and interest rates,\u201d Peachtree Group<\/a>\u00a0CEO\u00a0Greg Friedman<\/a>\u00a0said.\u00a0<\/p>\n \u201cThat said, when you get a sharp, unexpected spike, like tariffs on finished copper products, it forces teams to reexamine budgets in real time. Some projects get delayed, others get rescoped. The bigger concern is the compounding effect.\u201d<\/p>\n Where Copper Can’t Be Cut<\/p>\n While copper may not dominate a project\u2019s budget \u2014 KPG\u2019s Kraut said it typically accounts for 3% to 5% of total hard construction costs for commercial buildings \u2014 it plays an outsized role in asset types like data centers, hospitals and restaurants, where performance standards leave little room for compromise.<\/p>\n![\"Placeholder\"\/](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2025\/08\/placeholder.png\")
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