“As new tariffs reshape global trade, construction firms are reassessing supply chains to manage rising costs and hidden risks.”
Why this is important: Since President Trump first announced new tariffs in his inaugural address, the news regarding further tariffs, retaliatory tariffs imposed on the United States, and temporary extensions has been difficult for anyone to keep up with. For the construction industry, this lack of stability can be troublesome, especially for those sourcing materials from affected countries. Since January, the cost of materials in the United States, such as steel (15-25 percent), aluminum (8-10 percent), and lumber (15 percent), has skyrocketed. In a time of uncertainty, finding answers to one major question could ease the minds of American construction businesses: Where exactly are the materials we buy coming from?
Contracting with a seller and keeping track of tariffs imposed on their respective nation is just the tip of the iceberg. Not only do American businesses need to know where they are buying resources and goods from, but they need to know where those sellers are sourcing their own materials to discover any hidden exposure to tariffs or labor scrutiny. If you buy an elevator from a German business, not only do you need to understand tariffs imposed on Germany, but tariffs on every nation that the manufacturer sourced materials from, and so on. Multi-tiered supply chains have proven extremely hard to track, and new tariffs make it even more likely that businesses could get caught paying more than they expected.
Industry leaders are beginning to invest in supply chain transparency technology that will provide verifiable data to trace materials back to their points of origin. Access to this information will allow businesses to evaluate risks before buying and monitor price fluctuations, regulatory exposure, sustainability, and economic stability more closely. When such programs are made available, businesses should expect them to be a work in progress. How effective supply chain tracking is will largely depend on how successful businesses are in engaging their suppliers. Successful implementation will require a globally minded team that can work directly with suppliers to ensure data is reliable.
While major tech innovations are on the horizon, businesses can begin mitigating risks already by shifting away from regions where forced labor, deforestation, or water scarcity is present. Taking a proactive approach to ensuring compliance with evolving trade and sustainability standards is the best way to develop long-term relationships. With tariffs and trade standards rapidly changing, visibility is everything, and the key to achieving it is to partner with suppliers who openly communicate and foster collaboration. Peace of mind is always worth the price, and businesses that continue to gamble by not effectively managing their supply chain risk will be caught in a whirlwind of ever-changing policy. --- Gabriel P. Papadopoulos, Summer Associate
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