Colorado Construction Sector Faces Rising Tariff Challenges

Denver, Colorado – The construction sector in Colorado is grappling with significant challenges as rising tariffs on essential materials exacerbate the financial strain on both developers and consumers. An analysis released by the Colorado Office of State Planning & Budget on September 4, 2025, reveals that tariffs have surged from an average of 3% in 2024 to a staggering 21% in 2025, marking a sevenfold increase. This level of tariffs is among the highest seen in over a century, recalling conditions from as far back as 1910.

The implications of this tariff hike are far-reaching, affecting not just construction but also agriculture, durable and nondurable goods, energy, health care, and technology sectors—collectively representing over 90% of Colorado’s international trade. The construction industry alone contributed $33 billion, or 6%, to the state’s gross domestic product (GDP) in 2024 and supports more than 190,000 workers across over 22,000 businesses.

Residents and businesses are already feeling the effects, as raw material costs for construction, including essential items such as steel, aluminum, and copper, have soared by 20-40% compared to 2020 levels. The construction materials constitute a significant portion of project budgets, comprising 35-50% of a home’s total construction costs. Consequently, residential construction costs have seen an increase of 15-25% compared to five years ago.

This sharp rise in costs has raised concerns about decreased construction activity, as developers face weaker demand and high capital costs. Initially, housing construction permits were projected to rise by 3.9% in 2025, but this forecast has since been slashed to a mere 0.5%, indicating a stagnation near 2024 levels. In the context of Colorado’s Western Slope, the construction sector represents 9% of the region’s GDP and 10% of its jobs, showing how integral the industry is to local economies.

The hurdles facing the construction industry extend beyond immediate financial barriers. There is a notable housing shortage in rural Colorado, compounded by the decline in construction activity amid rising costs. The state’s housing deficit, which peaked at 140,000 units in 2019, has decreased to 106,000 in 2023, highlighting ongoing challenges in addressing affordability and availability.

Governor Jared Polis has expressed concerns over these tariffs, indicating that they not only inflate costs for consumers but are also detrimental to the broader economy, forcing families into making tough financial choices. This feedback follows an executive order he issued in July, directing a study on the economic impacts of tariffs in the state.

Adding to the uncertainty surrounding these tariffs, a U.S. federal appeals court has recently ruled that the executive branch may lack authority over many of the tariffs imposed, with a decision regarding their future expected by October 14, 2025. Notably, counties expected to feel the most significant ramifications from the tariff hikes include Eagle, Garfield, and Mesa counties, as well as the Denver Metro Area.

These developments signal a period of instability for Colorado’s construction sector, which is vital to the state’s economic landscape. Stakeholders across the industry are closely monitoring the situation, weighing the potential long-term effects of sustained tariff rates on housing availability and development activity in the state.