On Feb. 1, 2025, President Donald Trump announced that tariffs on all goods imported from Canada and Mexico — including aluminum and steel — would be imposed at 12:01 a.m. on Feb. 4, 2025. The administration later agreed to pause that action for 30 days. Then, on Feb. 9, 2025, President Trump announced plans to sign one or more executive orders increasing tariffs on all aluminum and steel imports regardless of country of origin. The executive orders terminate previous exceptions and quotas on certain countries and implement a 25% tariff on all aluminum and steel products imported into the United States. The orders make an exception only for derivative steel articles that are processed in another country from steel articles that were melted and poured in the U.S., and for derivative aluminum products processed in another country from aluminum products that were smelted and cast in the U.S. The 30-day tariff pause on Canadian and Mexican goods expired at 12:01 a.m. on March 4, 2025, and the remaining changes from the subsequent executive orders are set to go into effect on March 12.
Construction industry participants should prepare for what might come if the tariffs are implemented given the long-term nature of some construction projects and the ever-changing political landscape. The effects could include significant increases in the price of these critical raw materials throughout the supply chain, from supplier to contractor to owner.
Material Suppliers
Tariffs are imposed on the importer of record. The party most likely to feel the immediate impact of the tariffs is the party closest to the importer in the supply chain — in the construction supply chain, the material supplier. Suppliers should map out where each of their own suppliers are located and where their products are from. They should also look at their contracts with importers to determine whether the importer has reserved the right to pass the price increase along to the supplier as the buyer. Suppliers should inquire whether their contracts allow them to demand that their own vendors import from elsewhere, including domestic sources, to avoid the cost of the tariff entirely. Suppliers who are currently negotiating contracts with customers should take tariffs into account when providing price quotations.
General Contractors
General contractors (GCs) face the greatest risk of being caught in the middle — obligated to cover price increases from their suppliers while unable to pass those costs on to their customers. GCs should likewise be reviewing their contracts — both with the owner and with subcontractors and suppliers — to determine what rights they have. Does the contract with the owner provide a mechanism for requesting price increases based on the increased cost of raw materials? Are there long-term pricing agreements with suppliers that guarantee goods at a specific price? Knowing your rights under these contracts will put you in the best position to negotiate with both owners and suppliers so you are not bearing the brunt of the entire cost increase resulting from the tariffs. Additionally, contractors should assess whether these contracts grant them the right to require suppliers to source materials from within the U.S. or from alternative suppliers unaffected by the tariffs, thereby avoiding the cost increase entirely. If suppliers are unable to resource, it may provide the contractor with the leverage needed to demand that less, or even none, of the increased price is passed on to them.
Owners
Owners who enter into contracts with general contractors may have varying terms in those contracts for what happens if the cost of materials increase. Owners should review the terms of their existing contracts to determine whether a mechanism exists for general contractors to pass cost increases on to the owner. If the contract states that the owner will reimburse the general contractor for costs, the cost of the project may grow significantly if raw materials increase in price. Even if your contracts include a fixed price, problems may arise if your contractors are unable to perform due to the increased costs that will likely be passed onto them by their suppliers. It is essential that owners are prepared for cost-increase demands that could occur, or for threats of repudiation on the part of their contractors.
