Copper sits at the center of the U.S. economy’s most capital-intensive sectors: real estate, infrastructure, energy, transportation, and artificial intelligence. A proposed 50% tariff on imported copper and semi-finished copper products, announced by President Trump on July 9 and set to take effect August 1, would reach deep into each of these industry segments.
Following the announcement, U.S. copper futures surged over 10%, reaching a record high of $5.682 per pound. Meanwhile, global prices on the London Metal Exchange fell as much as 2.4% at the open before settling near $9,653 per ton, amid concerns over lower U.S. demand and growing trade volatility.
Although the measure is positioned as a national security measure to strengthen domestic copper production, the near-term effect would be sharply higher material costs at a time when construction and housing markets are navigating cost pressures.
The U.S. imports roughly half of the copper it consumes. This supply is critical not only to traditional uses like housing construction and utility infrastructure, but also the buildout of AI data centers that rely heavily on copper-intensive electrical systems.
“Copper touches nearly every corner of the CRE market,” said Dianne Crocker, research director at LightBox. “This tariff threatens to raise input costs on development across asset types, from affordable housing to high-performance data centers, when project costs are increasingly under scrutiny and developers are working to contain risks in a shifting market.”
Real estate developers, lenders, and investors now face a shifting cost structure that could disrupt timelines, suppress returns, and force a rethinking of project assumptions heading into the second half of 2025. For those building near the edge of financial feasibility, the copper tariff may be enough to push projects out of reach.
Copper’s Role in the CRE Ecosystem
Copper is deeply embedded in the CRE supply chain. It runs through the walls, ceilings, rooftops, and systems of nearly every asset class. From multifamily developments to industrial warehouses and medical offices, copper is used in wiring, HVAC, plumbing, fire safety, elevators, and renewable energy systems. That ubiquity makes it one of the few construction inputs whose price moves can ripple across the entire development pipeline.
In commercial projects, copper loads are often substantial. Data centers, lab facilities, and high-rise towers require dense electrical and mechanical systems that depend on copper’s conductivity and thermal performance.
Copper also is central to grid infrastructure, EV charging networks, and distributed energy systems. As more buildings integrate solar, storage, and intelligent load balancing, copper demand climbs accordingly. The planned tariff will increase the cost of this foundational material across both old-economy assets like housing and newer, electrified developments.
“This is not a niche material,” said Manus Clancy, head of Data Strategy at LightBox. “Developers can’t build at scale in the U.S. without copper, and costs that spike suddenly are going to hit every pro forma on the table.”
AI Data Centers Push Copper Demand to New Highs
The artificial intelligence boom is accelerating demand for copper in ways few sectors can match. Data centers built to power large language models and enterprise AI workloads are among the most copper-intensive facilities in commercial real estate. Their rising electrical load is reshaping both regional grid planning and the materials market that supports it.
Boston Consulting Group (BCG) estimates that U.S. data centers currently consume around 82,000 megawatts of power. That number is expected to rise by another 45,000 megawatts by 2029, driven by AI applications and cloud infrastructure growth. Meeting that surge will require an additional 1.2 million metric tons of copper, according to the Copper Development Association.
Global investment in digital infrastructure is following the same trajectory. BCG projects $1.8 trillion in capital will be deployed between 2024 and 2030 to keep up with demand for computing power. That money is being directed into power-hungry builds where copper is a critical input across electrical, cooling, and safety systems.
Energy analysts say that copper’s superior conductivity is not a luxury but instead a hard requirement for facilities trying to hit multi-megawatt capacity without sacrificing performance or uptime. From power cables and busbars to cooling systems and grounding infrastructure, copper runs through nearly every core system in a data center. A 2023 study found that Microsoft’s campus in Chicago, for example, used an estimated 2,177 tons of copper, roughly 27 tons per megawatt.
As utilities and developers race to keep pace with AI-driven demand, copper has become a constraint on both pricing and project timelines. Adding an additional cost pressure like a 50% tariff tightens that constraint and raises the risk of delay for hyperscale builds, cloud expansions, and co-location projects.
“Power availability has become a gating factor in data center site selection,” said Clancy. “If copper costs spike or supply tightens, it will ripple through every decision, from site feasibility to grid interconnection strategy.”
Housing and Construction Costs Face New Pressure
A copper tariff also threatens an already beleaguered housing market. As explored in last month’s housing market breakdown, May housing data revealed a steep drop in starts and new-home sales, reinforcing how exposed the sector remains to rising input costs.
Copper plays a critical role in residential construction, embedded in everything from wiring and plumbing to HVAC and appliances. The Copper Development Association estimates that each new home contains nearly 440 pounds of copper. Any sustained rise in copper prices hits directly at the input costs of housing development, particularly for entry-level and workforce projects.
Other materials are rising as well. Aluminum prices are set to increase again after the White House announced another round of tariffs on aluminum and steel products. Fiberglass insulation manufacturers have announced an 8% price increase effective February 3, 2025. Concrete prices have shown a noticeable upward trend from 2019 to 2024, with the average price per cubic yard reaching $178.58 in 2024.
Builders are already operating in a difficult environment, marked by extended lead times for electrical equipment, fluctuating shipping costs, and persistent labor shortages. A new material cost shock only adds to the strain.
The National Association of Homebuilders estimates that earlier tariffs on steel, lumber, and other imported materials added nearly $11,000 to the cost of a new home. The proposed copper tariff would push that figure higher, with the sharpest impact felt at the lower end of the price spectrum.
Commercial developers face the same calculus. Office retrofits, warehouse expansions, and retail construction rely on copper-heavy fire safety, utility, and mechanical systems. These projects are sensitive to swings in material pricing, and cost volatility at this scale can tip deals out of feasibility.
Copper Volatility Reshapes Project Risk and Feasibility
The copper tariff adds a layer of uncertainty at a time when underwriting already requires more precision. For developers, fluctuating input costs complicate feasibility models and force conservative assumptions around timelines, bids, and returns. Materials volatility isn’t just a construction issue, it’s a capital planning problem.
Office, industrial, and multifamily developments are among the most exposed. Each relies heavily on copper for core systems like electrical wiring, HVAC, safety infrastructure, and mechanical power. For tenants, higher development costs often translate to higher rents. In markets at the edge of affordability, that dynamic can depress leasing velocity and lower occupancy.
The broader risk is investment hesitation. If material pricing swings widen further, or if policy remains unpredictable, new capital may delay deployment. Financing also becomes more complex. Lenders and equity partners are increasingly asking for real-time cost tracking, contingency allocations, and escalator clauses in construction contracts.
“Developers are being forced to underwrite in pencil,” said Clancy. “You can’t lock in a fixed model when copper or aluminum costs might change 15% mid-cycle.”
What to Watch: How Developers Navigate the New Cost Landscape
1. Smarter Project Design and Materials
Developers may rethink designs to reduce copper exposure without compromising performance. Value engineering now focuses on cutting copper use in non-critical systems while preserving reliability in high-load areas.
Modular and prefabricated MEP systems are gaining traction as a way to control labor costs and reduce material waste. In parallel, some are exploring U.S.-sourced or composite alternatives to bypass import volatility.
2. Adjusting Procurement and Contracts
Supply chain flexibility is now essential. As of 2024, lead times for key electrical equipment such as switchgear, switchboards, and transformers range from 70 to over 120 weeks, with some large transformer orders extending to 210 weeks. Locking in early and diversifying suppliers across geographies can reduce exposure to disruption.
Contracts are also evolving. Escalation clauses and transparent pricing terms are being built in to reflect real-time cost changes and protect both developers and partners.
3. Positioning for What Comes Next
While copper tariffs introduce immediate cost pressure, they could also accelerate investment in domestic copper processing. The U.S. currently lacks meaningful smelting and refining capacity, a vulnerability highlighted by rising demand from data centers, grid infrastructure, and electrified buildings.
Over time, reshoring efforts could reduce reliance on copper imports and align with broader shifts toward critical mineral security and supply chain resilience. That transition won’t happen quickly, but developers that act early by forming partnerships with U.S.-based manufacturers or reworking procurement strategies may gain a long-term edge.
“The developers who build flexibility into their sourcing, whether by pivoting to lower-cost alternatives or securing domestic supply early, will be in the strongest position,” said Clancy.
Tariffs create short-term friction but also force smarter procurement decisions that can pay off over time.
“2025 will be a reset year for construction strategy,” Clancy noted. “The market will reward those building smarter, not just bigger.”
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