Source: Modern Retail
Date: 15th September 2025

Rising raw material expenses force companies to adjust expansion plans and rethink investment strategies.

American manufacturers are facing significant cost pressures as tariffs on raw materials such as steel and aluminum drive up expenses for new factory projects.

One U.S.-based beverage company recently reported that its $60 million expansion plan was hit with a $3 million overrun due to steel tariffs, forcing it to delay other upgrades and redesign aspects of its facility.

While tariffs intend to strengthen domestic manufacturing, companies warn that the unplanned costs are limiting growth and complicating long-term expansion strategies.

The Washington Center for Equitable Growth found that tariffs have raised factory construction costs by 2–4.5% annually, with overall construction expenses up 2.3% year-on-year.

Surveys from the Associated General Contractors of America show that 16% of firms have postponed or canceled projects due to tariffs, while 41% have raised prices to offset higher material costs.

Even companies that already manufacture in the U.S. are being forced to absorb the financial impact, building new scenarios and engineering workarounds to keep projects on track.

Other manufacturers are expanding despite the hurdles. A custom apparel and embroidery company, for example, is investing in new facilities in Houston and Atlanta while also strengthening international operations in Mexico, Canada, and the Dominican Republic.

However, the company noted that building new U.S. factories now costs about 50% more than five years ago, mainly due to materials not being produced domestically.

For many businesses, this environment has reinforced the need for supply chain diversification, automation, and nearshoring strategies to balance growth ambitions with the financial realities of tariff-driven inflation.