Overview

The pending implementation of the 2025 tariffs will present a considerable challenge to the construction industry, particularly in terms of material costs and supply chain stability. Drawing from the experiences of the 2018 Section 232 and Section 301 tariffs, it is essential for owners and developers to understand the potential ramifications and strategies to mitigate risks.

Lessons from the 2018 Tariffs

When the US Government imposed tariffs on steel, aluminum (Section 232), and a broad range of Chinese imports (Section 301) in 2018, the construction industry saw substantial disruptions, including:

  • Increased Material Costs: Prices for steel and aluminum surged, impacting contractors’ budgets and timelines.
  • Supply Chain Delays: Limited availability of key materials forced many projects into delays or redesigns.
  • Contractual Adjustments: Developers and contractors increasingly incorporated escalation clauses and alternative sourcing strategies.

These tariffs contributed to price volatility, requiring the industry to adapt through long-term procurement contracts, diversification of suppliers, and stockpiling critical materials where feasible.

Industry Preparations for the 2025 Tariffs

Recognizing the potential for similar disruptions, contractors and suppliers have been preparing for the impact of the new tariffs by:

  • Preemptive Sourcing: Many firms have accelerated procurement of essential materials before tariffs take effect.
  • Supplier Diversification: Businesses are actively seeking alternatives outside of China and traditional steel suppliers to mitigate price hikes.
  • Reassessing Contracts: Contractors are pushing for escalation clauses to account for unforeseen cost increases.
  • Prefabrication & Material Efficiency: To offset increased costs, firms are investing in off-site prefabrication and more efficient material usage.
  • Requesting Additional Contingency Plans: Uncertainty in implementation is causing confusion amongst the general construction community. Currently, we are seeing additional contingency plans requested to be integrated into construction budgets. The wide range of these contingencies are impacting proformas.

A key challenge with the 2025 tariffs has been the unpredictability surrounding their enforcement. The evolving situation of the tariffs has resulted in delayed implementation, creating uncertainty for long-term project planning. This lack of clarity has made it difficult for developers to make strategic decisions regarding procurement, pricing, and financing.

Given this volatility, it is critical to remain agile by:

  • Monitoring policy developments closely.
  • Establishing flexible contracts with contractors and suppliers.
  • Developing contingency budgets to absorb potential price fluctuations.
  • Implementing mitigation strategies for currency fluctuations which can add to material volatility.
  • Maintaining an educated position and considering professional advice.

Conclusion

While the full scope of the 2025 tariffs remains uncertain, lessons from the 2018 tariffs provide a roadmap for mitigating potential disruptions. Developers and owners should continue to prepare by adjusting procurement strategies, diversifying supply chains, and negotiating flexible contracts to manage cost volatility. Staying informed and adaptable will be key to navigating this evolving trade environment. Cumming Group will continue to pay close attention to the fast-moving developments and monitor the implications.

Commodity Primarily Manufactured in… Tariff Risk Comments
Aluminum Mill Shapes United States, Canada, Mexico High Tariffs on all foreign steel and aluminum are set to take effect on March 12. Those on Mexico and Canada have been postponed until April 2nd.
Concrete Pipe United States Low Imports supplement American production, but not in quantities significant enough to be affected.
Construction Equipment United States, Germany, Japan Low Imports supplement American production, but not in quantities significant enough to be affected.
Copper and Brass Mill Shapes United States, Chile Medium Copper has a lot of end uses, and the US does not produce enough of it on its own to satisfy domestic demand. This makes copper tariffs a good candidate for funding Trump’s proposed tax cut.
Crude Oil United States, Canada Low A 10% tariff on Canadian energy imports has been postponed until April 2nd.
Fabricated Structural Metal United States Low Imports supplement American production, but not in quantities significant enough to be affected.
Concrete Reinforcing Bars United States Low Imports supplement American production, but not in quantities significant enough to be affected.
Flat Glass United States, China Medium While the US imports from China, these are comparatively small. Imports from China are already subject to a 10% tariff.
Gypsum Products United States, Canada Medium A 25% tariff on Canadian imports has been postponed until April 2nd.
Iron and Steel United States, Canada, Mexico High Tariffs on all foreign steel and aluminum are set to take effect on March 12. Those on Mexico and Canada have been postponed until April 2nd.
Lumber and Plywood Canada Medium A 25% tariff on Canadian imports has been postponed until April 2nd.
Metals and Metal Products United States, Canada, Mexico, China High Tariffs on all foreign steel and aluminum are set to take effect on March 12. Those on Mexico and Canada have been postponed until April 2nd.
Natural Gas United States Low Imports supplement American production, but not in quantities significant enough to be affected.
Nonferrous Metals United States, Canada, Mexico, China Medium Chinese metal products are already subject to a 10% tariff. Those on Canada and Mexico have been postponed until April 2nd.
Paint Materials United States Low Imports supplement American production, but not in quantities significant enough to be affected.
Plastic Resins and Materials United States Low Imports supplement American production, but not in quantities significant enough to be affected.
Ready-Mix Concrete United States Low Imports supplement American production, but not in quantities significant enough to be affected.
Roofing Materials United States Low Imports supplement American production, but not in quantities significant enough to be affected.
Semiconductor & Electronic Component Manufacturing United States, Taiwan, South Korea Low While the US produces semiconductors domestically, it currently cannot compete with foreign products in terms of quality and quantity.
Sheet Metal Products United States Medium Imports supplement American production, but not in quantities significant enough to be affected.