News Summary
The construction industry in Colorado is facing severe challenges due to a significant rise in tariffs on essential materials. A recent report reveals that tariffs have surged to 21%, negatively impacting developer sentiment and profit margins. This situation has led to a predicted stagnation in housing construction permits and compounded the housing affordability crisis in the state, particularly in rural areas. The ongoing economic pressures have raised concerns about future housing availability and overall economic stability in Colorado, especially with potential changes to tariff enforcement on the horizon.
Denver – The Colorado construction sector is facing significant challenges due to unprecedented rises in tariffs on crucial materials, resulting in negative impacts on developer sentiment and profit margins. A recent report from the Colorado Office of State Planning and Budget, released on September 4, 2025, highlights the effects of these tariffs, which have skyrocketed from an average of 3% in 2024 to an alarming 21% in 2025, representing a sevenfold increase. This spike in tariffs is among the highest levels seen in over a century, comparable to the situation in 1910.
The construction, agriculture, durable and nondurable goods, energy, health care, and technology sectors—which collectively contribute over 90% of Colorado’s international trade—are being directly impacted by these increased costs. The construction industry alone made substantial contributions to the state’s economy, adding $33 billion or 6% to Colorado’s gross domestic product (GDP) in 2024 and employing over 190,000 workers across more than 22,000 businesses.
In the Western Slope region, the construction sector accounts for 9% of the local GDP and 10% of jobs. However, developers are now contending with raw material costs, such as steel, aluminum, and copper, which have escalated by 20% to 40% compared to 2020 prices. Approximately 7% of materials used in residential construction are imports, leading to overall project costs that are currently 15% to 25% higher than they were five years ago.
Construction materials typically comprise 35% to 50% of a home’s total construction costs, which has hindered construction activity amid rising demand and high capital costs. Initially projected to experience a 3.9% increase in housing construction permits for 2025, recent forecasts have been drastically revised to just 0.5%, with expectations indicating that permit levels may remain stagnant at 2024 levels.
The rising costs and diminished construction activity are compounding the housing affordability crisis in rural Colorado. The state has seen its housing deficit decrease from a peak of 140,000 in 2019 to 106,000 in 2023; however, the economic strains are causing concerns over future housing availability, particularly in key areas such as Eagle, Garfield, Mesa counties, and the Denver Metro Area.
Governor Jared Polis highlighted that these tariffs are adversely affecting consumers and straining the economy, as families are forced to make tough financial choices. The recent challenges faced by the construction sector have sparked broader discussions about potential economic repercussions across the state.
Adding to the uncertainty, a U.S. federal appeals court recently determined that the executive branch may not possess the authority to enforce many of the existing tariffs, with an important decision regarding their future expected by October 14, 2025. The outcome of this legal analysis may significantly influence construction practices and overall economic stability in Colorado.
As the construction industry grapples with these intricate financial challenges, stakeholders continue to monitor developments closely, anticipating how shifting tariffs and material costs will ultimately reshape their operations and the broader economic landscape in Colorado.
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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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