Chicago’s construction industry is bracing for a seismic shift. With the threat of sweeping new tariffs on materials from China, Mexico, and Canada looming over 2025, contractors, developers, and suppliers across the city are scrambling to adapt. Some are stockpiling materials. Others are hunting for new suppliers in far-flung places like Brazil. All are asking the same question: How much will this cost us—and who will pay?
Let’s get specific. President-elect Donald Trump has floated tariffs as high as 60% on Chinese goods, and 25% on imports from Mexico and Canada. For an industry that relies on global supply chains, that’s not just a headline—it’s a gut punch. “We’re not sure what the cost of goods are going to be,” says Sandya Dandamudi, president of GI Stone in the West Loop. “I’m actually being proactive and looking for countries that I think are going to be tariff-safe.”
Why does this matter? Because Chicago is on the cusp of several mega-projects, from the United Center’s $7B redevelopment to the Illinois Quantum and Microelectronics Park. If tariffs hit, already sky-high project budgets could soar even higher. And it’s not just the big players feeling the heat. Small contractors, specialty suppliers, and even consumers could see costs rise—fast.
Material Costs: The New Wild Card
Steel, stone, lumber, copper, aluminum—pick your material, and it’s probably on the tariff list. Ken Simonson, chief economist for the Associated General Contractors of America, warns that steel is especially vulnerable. “What we saw when tariffs were put on by Trump before, domestic steel producers raised their prices pretty much in tandem with the amount of tariff,” he notes. “I would expect that again.”
Here’s a number to chew on: The price of steel mill products dropped by more than 7% between November 2023 and November 2024, according to AGC. But if tariffs are enacted, those prices could spike again—potentially adding millions to the cost of a single high-rise.
And it’s not just steel. Canadian lumber is a staple for Chicago’s homebuilders. Single-family homes, small-scale apartments, condos—all rely on it. Tariffs could put the homebuilding industry “on the bleeding edge,” Simonson says.
Supply Chains in Flux
For companies like GI Stone, the challenge is existential. “There’s very little stone that comes from the U.S.,” Dandamudi explains. “The tariffs are a very big deal for us. That’s all we’re talking about.” For major projects—like the new residential towers at the former Chicago Spire site—internationally sourced materials are the norm. Even the Obama Presidential Center, which is using American-sourced stone, is paying three times the average price.
Some firms are taking a page from the pandemic playbook: stockpiling materials before tariffs hit. Demand for industrial outdoor storage space in Chicago has surged in the last 90 days, says Mike Freitag of NAI Hiffman. Contractors are racing to secure timber, steel, and other essentials before the price tags jump.
Others are hedging their bets by diversifying suppliers. Dandamudi is heading to Brazil, hoping to find new sources that won’t be hit by tariffs. But even that’s a gamble. “The American quartz industry is not mature enough to give me what I need,” she says. “I’m looking for additional American suppliers, but it’s tough.”
Contractors: Wait-and-See or All-In?
Not everyone is panicking. Ryan Companies, a national commercial real estate firm with deep Chicago roots, is taking a measured approach. “We just need to work through our relationships with all of our trade partners and our suppliers in our procurement process to navigate any type of price volatility that may occur,” says Eric Nordeen, president for the Great Lakes region. “There’s not a lot of panic. I think there’s a general sense of optimism about the economy and about the industry moving forward, even if it has to recalibrate to certain changes in policy.”
Still, the uncertainty is real. High interest rates have already made it harder to secure funding for new projects. Add in the threat of tariffs, and some developers are hitting pause. “Before there was even talk of the tariffs, we’ve had an issue with not enough cranes in the sky,” says Tom Cuculich, executive director of the Chicagoland Associated General Contractors. “The pipeline of projects has been down. … It’s a challenging market with taxes and political uncertainty and the like.”
Who Pays? (Spoiler: Everyone)
Let’s talk about the bottom line. Tariffs are a tax paid by U.S. importers—not foreign exporters. That means the cost gets passed down the line, from suppliers to contractors to developers to, ultimately, consumers. The National Retail Federation estimates that a $40 toaster oven would cost $48-$52 after tariffs. For a $2,000 mattress, expect to pay up to $2,190. Now imagine those markups on a $100 million construction project.
For small businesses, the pain could be acute. “The ones who are 100% relying on China … there is no other option than increasing the price, or dying,” says Pierre-Nicolas Disser of QIMA, a global supply chain compliance company. Larger brands may be able to weather the storm, but smaller contractors and specialty suppliers could be squeezed out.
What’s Next for Chicago?
Despite the uncertainty, there’s a sense of resilience in Chicago’s construction sector. Data centers, for example, saw a 43% increase in construction spending between November 2023 and November 2024, and are likely to remain hot. But for many, the next few months will be a waiting game—watching policy, tracking prices, and hoping for clarity.
“As somebody who is a manufacturer in this country, I am being very adversely affected,” Dandamudi says. “More than me, my clients—who are the developers and the contractors—are going to be affected.”
One thing is certain: Chicago’s construction industry is about to be tested. Whether it bends or breaks will depend on how quickly contractors, suppliers, and developers can adapt to a new era of tariffs, supply chain pivots, and price volatility. Stay tuned.
