NEW YORK — A new report from the Manhattan Chamber of Commerce is raising concerns across the construction sector, warning that federal tariffs are significantly increasing project costs and slowing development activity in one of the nation’s most critical building markets.
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Released one year after tariffs took effect, the report — titled “The Tariff ‘Tax’ at One Year” — outlines the growing financial strain on households, small businesses and construction projects across New York City. Among its findings, rising material prices linked to tariffs are pushing total construction costs up by nearly 5%, creating new challenges for developers already navigating tight margins and high interest rates.
According to the report, tariffs have driven construction material costs up between 8.5% and 9.6%, affecting key inputs such as steel, equipment and manufactured components. For contractors and developers, those increases are compounding existing affordability challenges and threatening the feasibility of new housing projects.
Industry stakeholders say the impact is particularly acute in New York City, where construction costs are already among the highest in the country. Even modest increases in materials pricing can derail projects, especially those dependent on financing structures sensitive to cost overruns.
The report warns that these pressures are creating a “feasibility gap,” making it harder for developers to move forward with new residential construction at a time when housing demand remains high.
The construction slowdown is tied to a wider economic ripple effect. The report estimates that small businesses across the New York City metro area are absorbing approximately $4.5 billion annually in tariff-related costs, while households are facing an additional $4,200 per year in expenses.
"These tariffs are functioning as a massive hidden tax on New York’s Main Street," said Jessica Walker, President and CEO of the Manhattan Chamber of Commerce. "While the impact is national, the pain is decidedly local. Our small businesses cannot absorb 20% cost spikes or wait out geopolitical disputes. We’re seeing the weakest quarter for business formation in five years, and job growth has declined by 70% year-over-year."
The decline in business formation and hiring is expected to have downstream effects on construction demand, particularly in sectors such as retail, hospitality and mixed-use development that rely on small business growth.
The report highlights a sharp slowdown in economic activity that could influence future construction pipelines. New York City added just 33,400 private-sector jobs in 2025 — a 70% drop from the previous year — while business closures outpaced openings significantly during the same period.
At the same time, inflation in the New York City area reached 3.4% in 2025, outpacing the national average. Rising costs, combined with tariff-driven price increases, are placing additional pressure on both developers and consumers.
For the construction industry, the combination of higher costs and slower economic growth could translate into fewer project starts, delayed timelines and increased competition for available work.
The report emphasizes that New York City’s reliance on global supply chains makes it particularly vulnerable to tariff impacts. Sectors tied to imports — including construction materials and equipment — are among the hardest hit.
"The data is clear: federal trade policy is being paid for with New York City jobs," Walker continued. "We urgently renew our call for the federal administration to implement targeted exemptions to shield small businesses. If tariffs must remain a tool of foreign policy, they must not become a weapon against domestic entrepreneurs."
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Construction firms, particularly those working on large-scale urban projects, are being urged to closely monitor material pricing, reassess project budgets and account for continued volatility in global trade conditions.
For contractors operating in New York and other major metros, the findings signal a need for greater cost control and strategic planning. Tariff-related increases are not only affecting current projects but could reshape bidding strategies, contract structures and procurement decisions moving forward.
As policymakers weigh potential adjustments to trade policy, the construction industry will be watching closely. In the meantime, rising costs and economic uncertainty are expected to remain key factors influencing project viability and market activity in 2026.
This article is based on a report released by the Manhattan Chamber of Commerce. Read the full report here: https://www.manhattancc.org/tariff-tax-one-year
