Let’s cut through the noise over tariffs and respond with strategy rather than stress

Trade tensions are nothing new, but the recent wave of tariff anxiety has dominated headlines, boardrooms, and supply chain meetings with a familiar tone: fear. But is this anxiety truly warranted – or are we letting noise cloud our judgement?

The global trade landscape has undeniably shifted. As the World Economic Forum (WEF) commented last year, “In a more fractious and divided world, countries are increasingly making trade decisions based on global politics rather than just economic benefits”. Some disruption was expected, but the scale of the recent trade tariffs was not.

Let’s be clear, tariffs are generally not considered good for global economic growth, but as an industry, we need to look past the scaremongering headlines and take a measured approach to the recent tariff war.

The state of play

At the time of writing, the US has paused most tariff increases on imports beyond 10% until 8 July 2025 for most countries, other than China. The EU has also suspended its retaliatory tariffs whilst the UK’s approach of being somewhat more conciliatory in its rhetoric with no overt moves towards retaliatory tariffs appears to have paid off with last week’s announcement of a  long-awaited UK-US trade deal. While the full impact is still winding through global supply chains, the initial storm may have passed – for now.

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The Office for Budget Responsibility (OBR) sees UK GDP taking a minor hit of -0.2% to -1% by 2026/2027. The International Monetary Fund (IMF) also downgraded UK growth forecasts for 2025 from 1.6% to 1.1%. So, while there is consensus on slowing economic growth, which may hold back construction pipelines, input costs will be impacted on a more nuanced level.

Geopolitics happen quickly. Construction pricing has an inertia – things will change, and probably numerous times before the end of the year. However, at RLB, we think the bigger near-term risk will be supply chain disruption.

To help us assess the impact of tariffs here in the UK, it’s worth looking to our US counterparts. Insights from RLB’s North America First Quarter 2025 Construction Cost Report tell us that when tariffs were last being used as a negotiating tool in 2018, they only marginally impacted certain materials. Approximately 70% of construction materials are sourced domestically, insulating much of the industry from direct tariff impacts. Even for imported materials, tariffs will not raise project costs by the percentage rates reported in the news; material costs represent only a fraction of overall construction and project costs, and tariffs typically apply to only a portion (of a portion) of those materials.

We are seeing the rate of construction cost increases actually decreasing, dropping from 1.11% last quarter to 0.98% in Q1 2025; congruently, the year-over-year rate is 4.35%, down from 5.86% this time last year.

Still, we should be mindful of how global market imbalances can ripple. When tariffs make one market less attractive, like the US, we may benefit from diverted supply. This could actually lead to cheaper imports into tariff-free markets like the UK.

But that’s not all. Irrespective of cost differences, global trade shifts can cause risk to just-in-time deliveries. This may increase programme risk. Aside from the tariff headlines, in March the US announced plans for additional port fees on Chinese-built ships. This has the potential to increase congestion in European ports as well as changes to global supply routes.

So, what should the industry do?

Construction is already facing several long-term structural challenges, just think of the current industry efforts to tackle net zero, building safety and procurement reform. We need that same strategic mindset now. Rather than feeding tariff fear, we must stay informed, but not alarmed. Understanding developments and responding, not reacting, to them is key.

We must engage deeper into our supply chain, gaining visibility on risk and resilience, and we need to price risk sensibly, not speculatively.

Ultimately, we must treat tariffs as one factor in a broad risk landscape, not the defining threat to progress. This is the time for measured strategic leadership – not short-term panic.

Andrew Reynolds is chief executive and global board director at RLB