US market intelligence: the tariff divide
Our H2 2025 US market intelligence report provides market and regional analysis for the region, as well as economic insights from our team of experts.
Economic and construction market overview
Macro conditions are weakening in the US. GDP growth slowed sharply in Q4, and job gains were revised down. The Federal Reserve has also paused after 75 basis points of cuts, with little further easing expected.
Construction spending remained soft, ending in 2026 about 1.0% below year ago levels. Private activity fell nearly 3.0% while manufacturing construction dropped more than 11%, though public spending rose 3.6%.
Tariff exposed materials like steel and copper saw clear price gains, with 50% Section 232 duties and a new 10% surcharge raised costs. With a tight labour market and sustained tariffs, bid price escalation is projected at 4.0% for 2025 and 4.25% for 2026.
The Federal Reserve sees current labour and inflation trends as broadly balanced. However, continued softer job growth and slower activity may lead to more than one rate cut this year.
Materials
The Supreme Court’s decision removes IEEPAbased reciprocal tariffs on many imported components and finishes, but the 50% Section 232 duties on steel, aluminum and copper remain. A temporary 10% Section 122 surcharge now applies to all imports for up to 150 days.
Overall, this is a partial easing of trade pressures. Core metals like structural steel, aluminum and copper still face steep tariffs. But many components, finishes and mechanical items once hit by IEEPA rates should see real cost relief in the coming months.
Labour
Wages are outpacing inflation as the labour market stays tight. Construction wage growth moderated throughout 2025 but continued to outpace inflation. Average hourly earnings rose 3.8% year-on-year in Q4 2025 to US$40.26, easing from 4.4% in Q4 2024.
CPI growth ran at 2.8% over the same period, narrowing the real wage gap to under 1.0%, down from 1.7% a year earlier. Workers are still gaining purchasing power, which supports labour force retention. However, the narrowing real premium through 2025 suggests that the strongest period of catch-up has passed.
What do current market conditions mean for our escalation forecasts?
The Supreme Court’s 20 February 2026 validation of IEEPA tariffs, combined with a cooling construction market, is reshaping the escalation outlook. Key trends informing our forecasts include:
Current activity
Nominal spending continues to contract, with real output declining further after adjusting for cost increases. Public and utility-sector work carried volume while private activity softened.
Capital
Three Fed cuts have eased financing pressures but continue to weigh on private project starts.
Materials cost and availability
The BLS Producer Price Index (PPI) construction materials composite accelerated in Q4 at its fastest pace since early 2023, led by tariff-exposed metals. Non-metal inputs remained relatively flat to declining.
Labour
The wage growth moderated but is still outpacing inflation. The vacancy-to-unemployed ratio rose to 0.54 in Q4, suggesting modest improvement in hiring conditions.
Machinery and equipment
Machinery and equipment costs are re-accelerated to 5.0% year-on-year, driven by generators and transformers.
Trade policy
The tariff environment continues to pose challenges for builders. The Associated General Contractors of America reports that two-thirds of contractors have seen at least one project postponed or scaled back.
In 2026, bid price escalation is expected to rise slightly from 4.0% to 4.25%, which is driven by trade realignment and persistent labour market tightness. However, market fundamentals are cooling: non-residential spending is flat, residential is down and backlogs have fallen to a four-year low.
Conditions may remain firm enough to keep costs elevated, but not enough to drive meaningful acceleration.
In 2027, we’re expecting bid-price escalation to ease to 4.0%. A more stable lending environment will improve project feasibility, which means the tariff picture gets clearer, softening demand further. Labour availability will remain competitive, but conditions should improve.
