Supply chain starting to feel ripple of tariff environment while costs modestly increase

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Non-residential construction costs have modestly increased across the nation, while the supply chain is feeling the ripple effects of global trade policy and evolving tariffs from Washington.

That’s according to the latest Mortenson Construction Cost Index, which tracked costs, employment and material prices throughout the first quarter of 2025. Labor and material availability have been steady throughout the first months of the year but stop-and-go tariff measures have created uncertainty for construction and developers alike.

On Thursday, a federal court blocked President Donald Trump from imposing sweeping tariffs on imports under an emergency-powers law, the Associated Press reported. The ruling followed several lawsuits arguing Trump’s “Liberation Day” tariffs exceeded his authority and left the country’s trade policy dependent on his whims.

Most markets adjusted by improving their sourcing and shedding constraints, but researchers said they expected cost volatility in certain market categories. There is enough planning activity and firm demand in several regions to support a balanced start to the year, the report showed.

Non-residential construction costs in the first quarter increased by 2.24% and rose 3.91% over the last 12 months, Mortenson reported. This increase was felt at all regional offices.

Milwaukee had the second highest growth this quarter of 2.58%, just behind Seattle, which experienced a 2.6% rise. Salt Lake City had the smallest increase of 1%. Milwaukee had a cost increase of 4.3% over the last 12 months, the report showed.

Building construction employment in the Milwaukee metro averaged 34,700 workers in the first three months of 2025, which is flat compared to the same period in 2024, the report showed. Employment will continue to be affected while market uncertainty persists, the report added.

Nationally, construction materials bounced back this quarter after softening and increased by 3.8% year-over-year, the report showed. Aluminum glazing systems and structural steel pricing in particular have been affected by the tariff environment, the report added.

The supply chain remains steady, and most regions haven’t seen major concerns with availability, the report showed. Minneapolis and Phoenix trade partners said they were more confident in sourcing while rebids and delayed project awards continue to fill the early year pipeline, the report added.

Nationally, labor costs have risen 4.6% year-over-year, and most trades reported little or no concern with availability, the report showed. Some contractors saw small trade shortages with regional megaprojects, such as data centers. In Minneapolis, there was a lack of rod busters and pipefitters while a large data center project was underway, and local electricians in Chicago were strained for availability during data center work, the report added.