The Capacity Crunch: Labor, Power and Materials Define the Market Outlook
The U.S. construction market enters the second half of 2026 with stronger underlying demand than anticipated, but that growth remains highly concentrated in a handful of sectors. Data centers, infrastructure, power generation, advanced manufacturing, pharmaceutical production and select healthcare markets continue to attract significant capital investment, while office, retail, higher education and commercial development remain comparatively subdued. The next 6–12 months will be characterized by uneven growth as financing conditions pressure certain private developments, while other sectors sustain robust project pipelines.
Data centers remain the fastest-growing segment of U.S. commercial construction, with power availability, municipal concerns, labor supply and equipment lead times emerging as the primary constraints to expansion. According to U.S. Census Bureau spending data, data centers accounted for roughly 5.4 percent of private nonresidential building construction spending in 2025, up from 1.7 percent in 2019, with further expansion anticipated. Forecasts suggest annual U.S. data center construction spending could exceed $80–100 billion by 2030, more than double current levels, accounting for more than 40 percent of global data center infrastructure investment, according to McKinsey.
Construction cost escalation is showing renewed upward pressure as demand collides with capacity constraints. Metals markets face supply limitations and elevated pricing, driven in part by recent Section 232 tariff clarifications that expanded duties on many steel-, aluminum- and copper-containing derivative products. Owners should anticipate construction pricing escalation levels to trend above historical averages over the next year, particularly in regions dense with data centers, power infrastructure, life sciences manufacturing and semiconductor-related development.
Advanced planning remains the key to success amidst an uneven market. Monitor resource capacity closely, particularly in the technical M/E trades, and secure early purchasing of long lead equipment along with early design phase evaluation of structural options to mitigate supply chain challenges.
Our Strategic Supply Chain Team maintains relationships with manufacturers and is closely monitoring the impact of tariffs on the supply chain.
Current Tariffs Implemented by the U.S. Impacting the Construction Industry
After the Supreme Court ruling that negated IEEPA tariffs, the Trump Administration instituted a 10-percent global tariff using provisions from the 1974 Trade Act. On May 7, federal courts ruled that the provisions of the 1974 Trade Act cannot be used in this manner, rendering the 10-percent global tariff obsolete at the time of this report.
The administration further issued specific clarifications to the Section 232 tariffs that impact aluminum, steel and copper imports, as well as their derivative products. Those changes are outlined in the timeline below.
2026 Tariff Timeline
July 1
USMCA is a free trade agreement between the U.S., Mexico and Canada.
On July 1, the agreement was up for a new 16-year renewal of its existing terms. The U.S. declined to renew.
The USMCA agreement is not terminated, and terms will be negotiated annually.
July 20
The Trump administration imposed Section 338 tariffs on Canadian cement and plywood, in addition to several goods unrelated to the construction industry.
New 50-percent Section 338 tariffs have been announced on Canadian goods. Previous USMCA exemptions do not apply.
July 24
The bottom line: trade continues as normal in the short term, but long-term uncertainty creates a challenging environment for cross-border supply chains and capital investments. New trade terms will likely be implemented on an ongoing basis. The temporary 10-percent Section 122 tariffs expired on July 24, but were then replaced by Section 301 tariffs.
The current administration is transitioning to targeted Section 301 tariffs, including a recently announced 25-percent tariff on specific goods from Brazil.
Additional Section 301 tariffs were imposed, ranging from 10-12.5 percent, due to concerns around forced labor from more than 60 countries.
Construction-related materials include wood, plywood, lighting and cement.
Section 232 - Materials
Steel
50%
Aluminum
50%
Copper
50%
Solar Panels
New Tariff
15%
Softwood Lumber
10%
Canada
Section 338: Cement and Plywood*
50%
Lumber
35.2%
USMCA*
—
Mexico
USMCA*
—
China
Section 301 remains in place
7.5-25%