US tariffs shake UK rebuild cost outlook in 2025

On 2 April 2025 – dubbed “Liberation Day” by the U.S. President – the United States unveiled sweeping import tariffs that sent ripples through global markets. These include a blanket 10% tariff on all imports from the UK​, alongside steeper duties for other major economies (20% on EU goods and 34% on Chinese goods)​. In addition, targeted levies were introduced in March, notably 25% tariffs on all steel and aluminium entering the U.S. The intent is to protect American industries by making foreign products pricier in the U.S., but such moves carry worldwide implications.

UK businesses and policymakers are now assessing the fallout. Britain’s government has reacted with “cool and calm heads,” seeking to negotiate a deal and avoid an escalating trade war​. Still, there is acknowledged economic risk: higher U.S. import costs could spur inflation in America, potentially dampening its economy and, in turn, affecting the UK through slower growth and unsettled financial markets.

As the dust settles on these tariff announcements, a key question emerges for the UK construction and insurance industry: Will these U.S. tariffs directly or indirectly drive up rebuilding costs in Britain?

Key construction materials: direct vs indirect impact

Rebuilding costs are heavily influenced by the price of core construction materials like steel, timber, concrete, bricks, and plasterboard, as well as the labour to install them. The good news is that most materials for UK building projects are sourced domestically or from within Europe, meaning they won’t suddenly incur new U.S. import taxes. In fact, the UK’s most popular construction materials – from sturdy concrete and classic brick to structural steel and timber frames – are generally produced or procured closer to home​.

However, indirect effects from the U.S. tariffs could still trickle through global supply chains.

Steel

The U.S. is a major steel buyer, so its 25% tariff on foreign steel will likely divert supply elsewhere​. Global steel prices could actually soften outside the U.S., as European and Asian steel mills seek alternative buyers in markets like the UK. In fact, UK indices show steel costs were already easing – with rebar and structural steel prices down 5–10% year-on-year by early 2025​.

If surplus steel floods into Europe, British construction firms might benefit from bargains on beams and reinforcement. On the other hand, UK steel manufacturers losing U.S. export business could cut production or raise domestic prices to compensate, which adds uncertainty. British authorities have even hinted at safeguards to prevent being “flooded” by diverted goods​, so policy responses will matter.

Timber and wood products

Timber for UK construction – used in everything from structural framing to finish joinery – is often imported from Europe and Scandinavia, with some specialty wood from North America. U.S. tariffs on EU wood products (baseline 10%, or 20% for EU nations) might cause European suppliers to pivot toward the UK market if American demand falters. In theory this could ease timber prices in Britain due to extra supply.

Recent years saw extreme swings in timber costs (a surge in 2021 followed by some correction), so an influx of supply now may help stabilise prices rather than spark a new rally. Still, any disruption in global trade or currency values could counteract this. For example, if the pound weakens against the dollar amid global volatility, the UK might pay more for commodities priced in dollars (like some bulk wood products). Overall, no immediate tariff is directly on UK timber, so any impact should be indirect and likely moderate.

Concrete, cement and bricks

These bulky materials are typically produced domestically or regionally due to high transport costs. U.S. tariffs don’t directly touch cement or bricks in the UK. In fact, Britain produces the vast majority of its own bricks and concrete components.

One indirect factor could be energy prices – cement production is energy-intensive, and if a tariff-induced economic slowdown lowers global oil and gas demand, fuel prices might dip, marginally reducing production costs for brick kilns and cement plants.

Conversely, if trade tensions keep energy prices elevated or cause exchange rate swings, input costs could edge up. On balance, experts do not expect U.S. trade policy to significantly alter UK concrete or masonry costs in the short term.

Plasterboard and finishes

Plasterboard (drywall) is a common rebuild material for interiors and is largely supplied by UK manufacturers or European firms.

The U.S. tariffs do not target these products specifically for the UK. Unless the trade war triggers broader inflation in global manufacturing inputs, plasterboard prices should remain driven by local factors like gypsum supply and production capacity. Similar logic applies to other finishing materials and fittings – any cost changes will likely come from domestic market conditions rather than U.S. tariffs.

In summary, the new U.S. import taxes do not directly levy UK construction materials, so immediate price hikes on British building sites are unlikely. In fact, one optimistic scenario, noted by an Office for Budget Responsibility economist, is that some goods that can’t easily find a U.S. market will seek buyers in the UK at lower prices.

Cheaper imports of items like steel or timber could even relieve cost pressures slightly for builders. Yet this is a best-case, “very, very mildly positive” outcome​.

Other scenarios – especially if the UK gets pulled into broader tit-for-tat tariffs – are decidedly negative for costs​. Industry groups warn that a full-fledged trade war would “disrupt global supply chains” and “stoke volatility in prices” across borders​. In practice, much will depend on how trade partners respond and whether a negotiated truce is reached in time.

Broader cost pressures on construction

Even without a direct tariff on British building materials, the wider economic ripple effects of this U.S. policy could influence rebuild costs. Tariffs tend to be inflationary – American companies must pay more for imported inputs, and some of those higher costs may be passed through globally. Economists caution that U.S. tariffs will raise costs in the U.S., feed into higher inflation, and possibly force interest rates to stay higher for longer​.

If the U.S. Federal Reserve keeps tightening monetary policy to tame tariff-fueled inflation, it could slow the world’s largest economy. A U.S. downturn or reduced growth would be felt in the UK through softer demand for exports and general economic cooling.

For the UK construction sector, a cooler global economy might cut two ways:

• Project Demand and Investment: Should global and UK growth slow, there may be fewer new construction projects initiated in the short term. Big developments might be postponed due to economic uncertainty or higher financing costs (as interest rates worldwide take longer to fall). Less construction activity could ease the demand-driven pressure on materials and labour, potentially relieving some price heat. In other words, a lull in building could give supply a chance to catch up, helping costs plateau.

  
  

• Supply Chain and Input Costs: Conversely, a trade war could introduce inefficiencies and friction in supply chains. If geopolitical tensions rise and trading partners retaliate with their own tariffs or quotas, the result can be material shortages or the need to source from less optimal suppliers. The Confederation of British Industry (CBI) stresses that “there are no winners in a trade war” – retaliation and fragmentation would “add to supply chain disruption… and volatility in prices.”​.

  
  

Even components not directly tariffed could see delays or insurance, shipping, and logistics costs increase under a less open trading system. Additionally, a weaker pound (if investors flock to the U.S. dollar as a safe haven) could make imported products and raw materials pricier for UK builders.

So far, the UK government’s measured approach – avoiding immediate retaliation and seeking a negotiated solution – is aimed at minimising these broader cost shocks.

By not mirroring the U.S. tariffs hastily, the hope is to prevent an escalation that would drive up prices of critical inputs. Nonetheless, businesses are urged to stay vigilant. The Greater Manchester Chamber of Commerce advises firms to map out their supply chains and brace for higher costs if any part of their production relies on tariff-hit markets, noting that even a 10% U.S. tariff on UK goods can indirectly affect components sourced via Europe or Asia​.

In construction, this might mean checking if, say, a specialist fixture or piece of equipment originates in America or another affected country – those items could see cost increases if new tariffs or counter-tariffs apply.

In the broader construction industry, cost pressure isn’t solely about materials. Labour shortages and wage inflation have been a major driver of rising build costs in recent years. A potential global slowdown might ease the heated competition for skilled labour (contractors could find it less difficult to hire if some projects pause), but if inflation remains high, wage demands will continue upward.

There’s also the question of energy and fuel: tariffs on oil-producing nations (the U.S. announced tariffs tied to buying from Venezuela, for instance) or simply trade uncertainty can influence energy markets, which then feed into transportation and manufacturing costs for construction. As of now, energy prices have moderated from the peaks seen during the 2022 geopolitical crises, but volatility remains possible.

Overall, the new U.S. tariffs add another layer of complexity for construction costs, albeit indirectly. While they don’t automatically mean dearer bricks or cement in the UK, they contribute to an economic backdrop that could swing either towards relief (cheaper imports, slowing inflation) or strain (supply disruptions, currency shifts). Industry leaders call for close monitoring of input costs over the coming months. As one trade body put it, we may be entering “the most challenging period in trade history” and companies should “put in place plans” to navigate potential cost fluctuations​.

UK building cost inflation: cooling off after 2021–2022 surge

It’s important to put the current situation in context. UK construction costs have been on a rollercoaster over the past few years. From 2021 through 2022, building material prices surged dramatically, driven by global supply chain chaos, commodity booms, and the war in Ukraine. In fact, average material costs in 2022 were about 25% higher than in 2021 – an extraordinary jump by any historical standard​.

Government indices show construction materials were nearly 55% costlier in 2022 than they were in 2015​, illustrating how sharply prices climbed in the aftermath of the pandemic. This rapid inflation pushed many rebuild valuations well above what property owners had originally insured for, contributing to a growing underinsurance gap (more on that shortly).

By mid-2022, construction inflation hit a modern peak – around 10.4% year-on-year in May 2022, according to the Office for National Statistics​. But by mid to late 2023, the fever started to break. Supply chains improved and demand tempered. Construction inflation fell below 5% by summer 2023​.

According to RebuildCostASSESSMENT.com’s analysis and BCIS forecasts, building costs were on track to rise only around 3% in 2024​ – a far more normal rate of increase. Indeed, industry data through late 2024 showed signs of costs leveling off.

Entering 2025, the trend was looking encouragingly stable. The UK government’s materials price index actually recorded a slight overall decrease in construction material costs (-0.9% year-on-year in January 2025)​.

In other words, on average, key materials cost a touch less this winter than they did a year before – the first annual decline in quite some time. Steel and timber prices, which had skyrocketed earlier, either stabilised or dropped: for example, fabricated structural steel was ~10% cheaper in Jan 2025 than Jan 2024​.

Certain products still rose (precast concrete items were up around 5–7%​, likely due to energy and labour costs), but the overall picture was one of plateauing prices. Construction experts began cautiously hoping that the era of extreme volatility was ending.

This backdrop is crucial: rebuild cost inflation was finally slowing to a manageable pace as of early 2025. For insurers and property owners, that meant index-linked policy increases could moderate, and the gulf between insured values and actual rebuild values might stop widening so rapidly. It’s against this backdrop that the new U.S. tariffs land – with the potential to upset the nascent stability.

Will they? Thus far, forecasts for UK construction cost inflation in 2025 haven’t been drastically revised upward, but it’s early days. Much depends on whether the tariff fight escalates or is resolved. If it remains a limited skirmish, the UK could escape with only minor cost turbulence, and rebuilding expenses may continue to settle down into low-single-digit inflation as previously projected​. If it blows up into a wider trade war with sustained global inflationary pressure, we could see renewed upward pressure on construction prices despite the recent calm.

Insurance rebuild valuations: navigating the uncertainty

For insurers, brokers, and property owners, the primary concern is ensuring buildings remain adequately insured amid changing rebuild costs. Even before this tariff issue, underinsurance has been widespread due to the past years’ cost escalations. Industry research indicates 76% of properties are underinsured in recent assessments​.

This means a huge number of policyholders could face a shortfall if they had to rebuild their property at today’s prices. The recent easing of inflation is a welcome development, but it does not erase the large gap that already formed. As RebuildCostASSESSMENT.com observed, construction inflation may be slowing, yet “the risk of underinsurance remains incredibly high.”​

The introduction of U.S. tariffs adds a new layer of uncertainty. Insurance professionals are watching closely to see if material or labour costs begin rising faster than anticipated. If certain imported items (say, specialised machinery or fittings) do get more expensive due to diverted trade patterns or if the general inflation rate tick upward, insurers may need to adjust their indexation rates on building sums insured. Many insurance policies use indices (such as the BCIS House Rebuilding Cost Index) to update the sum insured each year in line with building cost inflation. In 2021–2023 those index increases were unusually high, reflecting the sharp inflation. There were hopes that 2024–2025 index linking would come down to more normal levels as costs stabilised​. That likely remains the case – current predictions still peg rebuild cost inflation in the low single digits for 2025 – but the tariffs introduce some upside risk to inflation forecasts.

From an underwriter and claims perspective, stable or falling rebuild costs would be a relief. It could help prevent further widening of the underinsurance gap and even reduce claim pay-out severity if rebuilding a property in 2025 ends up slightly cheaper than it might have been last year.

For instance, lower steel prices could mean repairing a warehouse roof or factory frame after a loss would cost an insurer less than it might have at the peak of the steel shortage. If tariffs don’t disrupt this trajectory, insurers might see a bit of breathing room on large property claims costs. This, in turn, can flow through to more stable premiums for customers.

On the flip side, if the trade dispute causes even a few key materials to shoot up in price later this year, rebuild valuations may need to be reviewed more frequently. Property owners should stay proactive: even modest inflation can compound on already elevated costs. Given that a large majority of properties are still believed to be underinsured, now is not the time to become complacent just because inflation rates are slowing. The total rebuild cost of a building in 2025 is significantly higher than it was just a few years ago. For example, a home that could be rebuilt for £200,000 in 2019 might easily cost £250,000 or more to rebuild today after the cumulative increases – and that figure isn’t likely to shrink.

Regular rebuild cost assessments remain crucial. The most reliable way to ensure your building is correctly insured is to have a professional assessment of the rebuild cost​. With the tariff situation evolving, it would be wise to verify that your sums insured have a cushion for any unforeseen jumps in material or labour costs. Insurers and brokers are encouraging clients to update valuations, especially if they haven’t done so in several years or if they made renovations that could be affected by high-value imported components.

Outlook: cautious optimism with an eye on policy changes

In conclusion, the U.S. tariffs introduced in 2025 are a new variable for the UK construction and insurance sector, but they are not cause for panic regarding rebuild costs – at least not yet. The direct impact on common building materials in Britain should be muted, and there’s even a chance of minor cost relief for inputs like steel and timber if global trade flows adjust favourably​.

The larger concern lies in the indirect effects: macro-economic shifts, supply chain adjustments, and any retaliatory trade measures by other nations. A full-scale trade war could rekindle inflation and price instability, thwarting the recent progress in tempering rebuild cost inflation​.

So far, the UK is taking a pragmatic approach, engaging with businesses and allies to manage the situation calmly​. As a result, most analysts do not foresee a dramatic spike in UK construction costs attributable to these tariffs in the immediate term. Construction price forecasts for 2025 remain in the low-single-digit growth range, barring further shocks. In fact, the British Chambers of Commerce note that while a 10% U.S. tariff on UK goods is unwelcome, it’s the broader chain reaction – tariffs on the EU, China, etc. – that bears watching for any knock-on effects to materials pricing and project costs domestically.

For those involved in insurance rebuild cost assessments, the advice is to stay informed and be prepared. Monitor material price indices over the coming months to see if trends deviate from expectations. Keep an eye on trade negotiations – a resolution between the U.S. and its partners could quickly remove a lot of uncertainty, whereas a collapse in talks might signal rougher waters ahead. Given the heightened baseline of costs from the past few years, even a small resurgence in inflation could leave properties further adrift if values aren’t kept up to date.

In essence, 2025’s rebuild cost outlook in the UK is at a crossroads. One path, which we are cautiously optimistic about, leads to continued stabilisation: modest growth in costs and gradually improving alignment of insurance values to true rebuild values. The other path – avoidable if cooler heads prevail – could see cost pressures bubble up again, putting strain on the construction sector and increasing the stakes for accurate insurance coverage. Now is the time for vigilance. By combining close tracking of economic developments with proactive risk management (like up-to-date rebuild valuations and appropriate insurance coverage), UK homeowners, businesses, and insurers can navigate this period with confidence that, tariff turbulence or not, they’re prepared for whatever comes next.

About us

RebuildCostASSESSMENT.com makes it simple to get accurate rebuild cost assessments for residential and commercial properties. Leading the market in building insurance valuations, Rebuild Cost Assessment’s goal is to ensure insurance is working properly for property owners across the UK. This is achieved through clear and reliable reports, completed through remote surveys or site visits. They help property owners avoid the risks of inaccurate insurance and provide clarity through full rebuild cost assessments. 

Part of the RiskSTOP Group Ltd, Rebuild Cost Assessment is regulated by RICS (Royal Institution of Chartered Surveyors) and is FSQS (Financial Services Qualification System) accredited.

Sources:

• Sky News – What are Donald Trump’s tariffs and how does it all affect the UK?​ news.sky.com

• UK Government Construction Material Statistics – Jan 2025 Material Price Index​ gov.uk

• TheBusinessDesk – Chambers warn on Trump tariffs​ thebusinessdesk.com

• ​​RebuildCostASSESSMENT.com –

  • Is the tide really turning on buildings underinsurance?https://www.rebuildcostassessment.com/post/annual-infographic-2024

  • Building costs settling down, but significant underinsurance risks remain

    https://www.rebuildcostassessment.com/post/building-costs-settling-down-but-significant-underinsurance-risks-remain

  • How much longer will rebuilding costs keep rising?

    https://www.rebuildcostassessment.com/post/how-much-longer-will-rebuilding-costs-keep-rising

• CBI – CBI responds to government consultation with uk businesses in response to President Trump’s global tariffs https://www.cbi.org.uk/