By Navneeta Nandan

July 21 - (The Insurer) - Construction firms are reassessing their procurement strategies and project planning as they face escalating geopolitical risks as a result of changing U.S. trade policy, QBE warned in a report on Monday.

The report noted that tariffs on key construction materials, such as steel, aluminium, timber and copper, have inflated input costs in the sector, as well as delaying projects in North America and Europe.

According to the Associated Builders and Contractors, input costs rose for a third consecutive month in March 2025, reflecting a 9.7% annualised increase over the first quarter of the year.

"Given the U.S. economy's central role in global trade and finance, it seems inevitable that these rising costs will ripple through other regions, particularly Europe, in the coming months," said the report.

The nature of global trade in the construction sector means the prices of materials are highly sensitive to shifts in supply and demand, as well as to market concerns and expectations around geopolitical stability.

The report added that since U.S. trading partners such as China and the European Union have signalled their readiness to retaliate to the 10% baseline tariff, this will likely lead to higher costs for U.S. importers and significant shifts in global trade dynamics.

"The confluence of global supply chain disruptions, rising material costs, labour shortages and sustainability goals presents a complex risk landscape for the UK construction sector," commented Neil Fleming, UK construction and engineering portfolio manager at QBE.

Steel, aluminium and timber prices have increased due to potential U.S.-Canada tariff disputes, with copper prices surging by 29% in early 2025 amid sustained demand from the EV and renewable sectors.

Most UK construction firms are reliant on imported aluminium and timber, alongside UK's commitment to net-zero carbon emissions by 2050.

"In an environment on ongoing uncertainty, risk transfer mechanisms, such as insurance, alongside partnerships with specialised advisory firms, offer additional operational resilience," the report concluded.

"These tools not only help mitigate and distribute risk, but also allow leaders to focus on value creation, operational efficiency and long-term growth."