The U.S. construction sector faces ongoing hurdles as new tariff policies increase costs and disrupt supply chains. Recently introduced tariffs on essential materials such as steel, aluminum, lumber, and copper have added complexity to an already strained industry environment.

In March, a 25% tariff was enacted on these core construction materials. This was followed by April’s announcement of a broad “reciprocal tariffs” policy imposing a 10% baseline tariff on all imports, with extra duties on specific countries. Although this policy has been temporarily paused for 90 days—until July 8—uncertainty remains prevalent throughout the supply chain.

Despite the pause, prices for construction materials are still about 41% higher than before the pandemic, creating mounting challenges amid shrinking project backlogs and a tight labor market. To help construction firms manage these pressures, several strategies are recommended.

Open Communication Builds Resilience

“Shift your organizational culture toward transparency,” experts advise. Maintaining open dialogues with project owners, contractors, and vendors helps identify potential issues early. “A collaborative approach helps all parties reach reasonable solutions, particularly when everyone feels the impact of similar economic pressures.”

Contracts Demand Close Scrutiny

Re-examining contracts is crucial. “Re-evaluate existing contracts project-by-project to determine how exposed they are to tariff-related cost increases. Pay close attention to change order triggers, force majeure provisions, and price escalation clauses.” For upcoming contracts, negotiating terms related to material substitutions, price adjustments, and lead time extensions is essential.

Financial Clarity Is Critical

Strong financial controls can mitigate risks. “Implement detailed project budgets and cash flow forecasts, highlighting timing or cost-related risks,” financial advisors recommend. Increasing coordination between project management and finance teams allows for early detection and adjustment.

Procurement Strategy Adjustments

Material-heavy contractors should consider multiple procurement tactics:

• Stockpiling materials to lock in prices.
• Diversifying suppliers both domestically and internationally to build supply chain resilience.
• Offering material substitutions or producing some items in-house.
• Utilizing forward contracts or hedging to stabilize costs.

Credit and Bonding Policies Evolve

“Tariff volatility may lead lenders and sureties to take more conservative positions,” the article notes. Strengthening pre-qualification procedures for subcontractors and vendors, and possibly increasing bonding requirements, can reduce risk. Open communication with sureties ensures they understand risk mitigation efforts.

Looking Ahead

Industry experts caution that construction costs are likely to stay elevated for the near future, with some price hikes driven by opportunistic market behavior rather than tariffs alone. The tariff policy environment remains fluid, requiring vigilance and adaptability.

Nevertheless, “The construction industry has consistently shown resilience and adaptability,” the report concludes. Drawing on past experiences, firms can implement tighter financial oversight, innovative procurement methods, and more resilient contractual terms to navigate ongoing uncertainties.

For tailored advice on tariff impacts, industry leaders are encouraged to contact Carl Oliveri, Grassi’s construction practice leader and partner, or Ronald J. Eagar, president at Grassi, a top advisory and accounting firm serving the construction sector.

Recent market reports suggest that supply chain delays linked to tariffs have compounded longer-term issues such as port congestion and labor shortages. Industry insiders emphasize that technology and data analytics can provide predictive insights to better manage material availability and pricing fluctuations.

Moreover, several construction firms are exploring sustainable and locally sourced materials as alternatives to imported products, reducing exposure to tariffs and strengthening community engagement.

Trade associations continue lobbying for more stable and transparent trade policies, stressing the importance of a balanced approach that supports domestic industry growth while maintaining global competitiveness.

Originally reported by Carl Oliveri and Ronald J. Eagar in South Florida Business Journal.