When the Associated Builders and Contractors released their Jan 2026 data, the headline was stark: construction input costs had risen 7.1% year-over-year, outpacing general inflation by a wide margin. The driving force? A combination of new import tariffs and the ripple effects they create across supply chains.

What's Actually Being Tariffed

The 2026 tariff landscape for construction materials breaks down into two layers:

  • Section 122 Global 10% tariff: Applies to all U.S. imports, currently set to expire around July 2026. Until then, every material sourced internationally carries at least this baseline increase.
  • IEEPA Targeted Tariffs (up to 20%): Applied to specific materials — steel, aluminum, copper, and electrical components see the highest effective rates, per the QBE 2026 report.
  • Cascading price effects: Even domestic materials are rising because manufacturing inputs (energy, transport, steel) are tariff-affected.

The QBE 2026 report identifies Steel, Aluminum, and Copper as the highest-impact categories, with effective tariff rates averaging around 20% for each. For a project where these three categories make up a significant share of material costs — a commercial steel frame building, for example — the compounding effect can be substantial.

The Franchise Buyer Warning

FDD Item 7 Alert for Franchise Buyers: If you're evaluating a franchise opportunity, the Franchise Disclosure Document (FDD) Item 7 lays out estimated initial investment — but those figures were largely written before 2026 tariff impacts. Your actual buildout costs may be materially higher. Request updated vendor quotes and factor in a 10–20% contingency on material costs before signing.

The franchise build-out category is particularly exposed because these projects typically involve specialized equipment imports and custom millwork, both of which fall under high-tariff classifications. VettingBiz's research on how tariffs are reshaping franchise investment shows unit economics deteriorating across several QSR and service categories.

Construction Contract Tariff Clauses: What You Need

If you're a GC or a project owner signing construction contracts in 2026, tariff clauses are no longer optional — they're essential. The AGC's tariff resources for contractors recommend including provisions that:

  • Pass through material price escalation above a defined threshold (e.g., anything above 5% from bid date)
  • Define the tariff baseline — specify whether the 10% global baseline is included in the base price or treated as a separately adjustable line item
  • Set a cutoff date — define whether the clause expires when Section 122 expires (~$July 2026) or continues indefinitely
  • Scope electrical and specialty materials — these often fall under different HS codes and may have higher effective rates
Pro tip: For projects bidding now but starting after July 2026, lock in material supplier contracts with price guarantees now. The expiration of the global 10% tariff will create a demand surge as contractors rush to buy before the window closes — expect a secondary price spike in late Q2 2026.

The Bottom Line

For a $1M commercial construction project with 40% imported materials across steel, aluminum, and copper, our model estimates a cost increase of roughly $60,000–$88,000 over pre-2026 baselines — a 6–8.8% premium. Renovation projects with heavy electrical work face similar exposure.

Franchise build-outs and equipment purchases are particularly vulnerable because material costs are a larger share of the total project than in new construction, where labor dominates. A $200,000 franchise build-out with 50% imported materials could see $10,000–$20,000 in additional costs from tariffs alone.

The window is now. Use the calculator above, factor in your actual import exposure, and lock pricing before the Section 122 expiration triggers a secondary surge.