Colorado, September 28, 2025
News Summary
The construction industry in Colorado is grappling with soaring tariffs that have escalated to 21%, significantly raising costs for essential materials. Reports indicate that these tariffs are straining businesses and consumer budgets, leading to declining developer sentiment. Raw material prices have surged, contributing to increased project costs and slowing housing permit growth. The situation is exacerbated by a pressing need for affordable housing in the region, leaving both developers and families in a challenging economic environment.
Denver
The construction sector in Colorado is currently facing significant challenges due to a dramatic rise in tariffs on essential materials. As per a report from the Colorado Office of State Planning & Budget released on September 4, 2025, these higher tariffs have led to increased costs for businesses and consumers, consequently affecting developer sentiment and profit margins.
In 2025, tariffs have surged from an average of 3% in 2024 to a staggering 21%, marking a sevenfold increase. This current level of tariffs is among the highest seen in over a century, with the last comparable period recorded in 1910. The implications of these tariffs affect not only the construction sector but also agriculture, durable and nondurable goods, energy, health care, and technology industries, which collectively account for over 90% of Colorado’s international trade.
The Impact on Construction Industry
The Colorado construction industry contributed $33 billion, or 6%, to the state’s gross domestic product (GDP) in 2024 and supports over 190,000 workers across more than 22,000 businesses. In the Western Slope region alone, this sector represents 9% of the GDP and provides approximately 10% of local jobs.
Raw material costs for construction have experienced a significant hike, with essential materials such as steel, aluminum, and copper increasing in price by 20-40% compared to 2020 levels. Approximately 7% of materials used in residential construction are imported, leading to overall project costs rising between 15-25% in comparison to five years ago. Construction materials now account for 35-50% of a home’s total construction costs, sparking concerns over limited construction activity due to weaker demand and high capital costs.
Forecasts and Housing Market Challenges
Initially, housing construction permits were anticipated to increase by 3.9% in 2025. However, these forecasts have now been revised to a mere 0.5%, showing growth stagnating close to 2024 levels. The situation is further complicated by a notable lack of affordable housing in rural Colorado, worsened by decreased construction activity stemming from the rising costs of materials.
While the housing deficit in Colorado has decreased from a peak of 140,000 in 2019 to around 106,000 in 2023, the need for affordable housing remains pressing. Governor Jared Polis acknowledged that rising tariffs are inflating costs for consumers, placing further economic strain on families who must navigate challenging financial circumstances.
Legal and Economic Implications
A recent ruling by a U.S. federal appeals court indicated that the executive branch may lack the authority to enforce many of the tariffs currently in place. A decision regarding the future of these tariffs is expected by October 14, 2025. Areas particularly vulnerable to these tariff impacts include Eagle, Garfield, and Mesa counties, along with the Denver Metro Area.
Summary
The sharp increase in tariffs is raising costs in the Colorado construction sector, impacting developer sentiment and profit margins. With construction material prices surging and forecasted growth in housing construction permits significantly revised, the state’s economy faces additional strain. The legal and economic ramifications of these tariffs further complicate the landscape, leaving both businesses and families navigating uncertain financial waters.
Frequently Asked Questions (FAQs)
What are the current tariff rates affecting the construction industry in Colorado?
The current tariff rates have risen from an average of 3% in 2024 to 21% in 2025, which is a sevenfold increase.
How has this impacted construction costs in Colorado?
Construction costs for materials such as steel and aluminum have increased by 20-40% since 2020, leading to overall project costs that are 15-25% higher than five years ago.
What effect are tariffs having on housing construction permits?
Projected housing construction permits, which were initially expected to grow by 3.9% in 2025, have been revised to only 0.5% growth, reflecting stagnation close to 2024 levels.
Which regions in Colorado are most affected by the rising tariffs?
Regions particularly affected include Eagle, Garfield, and Mesa counties, along with the Denver Metro Area.
Key Features of the Rise in Tariffs and Its Impact on Colorado
| Feature | Details |
|---|---|
| Tariff Increase | From an average of 3% in 2024 to 21% in 2025 |
| Economic Contribution | Construction contributed $33 billion to Colorado’s GDP in 2024 |
| Material Cost Increase | Raw material costs up 20-40% since 2020 |
| Project Cost Increase | Overall project costs 15-25% higher than five years ago |
| Projected Housing Permit Growth | Revised from 3.9% to 0.5% for 2025 |
| Affected Regions | Eagle, Garfield, Mesa counties, and Denver Metro Area |
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Additional Resources
- Vail Daily
- Google Search: construction tariffs
- Colorado Biz
- Wikipedia: Tariff
- Denver Post
- Encyclopedia Britannica: economics
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