A single transformer step is simply O(1) (for a particular parameter size), but it applied a potentially infinite number of times.
Thus while a single transformer cannot solve any problem, a transformer system applied in the normal way can solve any computable problem.
So if you use the context not as a tape in itself, but as an io channel to read/write an infinite tape, the context for any given step can remain fixed in size, and so the step itself can be O(1).