How Construction Firms can Mitigate Tariff Impacts

Let's talk tariffs and construction contracts. Not theories - real scenarios. Like anything in construction, magical thinking won't help you here. These are some of the things we do to prepare for and deal with unexpected costs during development: Scenario 1: You're negotiating new agreements that could face tariff impacts. Here's something people miss: Your GMP doesn't protect you from tariffs. Not because tariffs are special - GMPs don't cover any unexpected costs outside scope. These costs flow to owners. That's just how it works. The only thing that actually protects you? Specific contract language. Four specific contract elements that may be helpful: -Explicit tariff pass-through provisions -Clear timing triggers for price adjustments (this matters because you need to know pre-tariff purchases aren't getting marked up) -Specific documentation requirements -Pre-agreed calculation methods (critical for equipment with mixed components) This isn't about trust - it's about ensuring price increases only reflect actual tariff costs. Like any other cost in construction, transparency is king. Scenario 2: You're already under contract when tariffs hit. First move: -Verify if released vendors have ACTUALLY purchased materials -If they haven't, move fast - they'll try to pass tariff costs regardless -Get ahead of this by confirming material purchases before tariffs kick in (after they're announced) Then, review your agreements: -Check contingency use provisions -Review change order terms -Look for tariff-specific language (rare, but worth checking) Contractors won't absorb tariff impacts. They can't. If someone tells you they will, they either don't understand their numbers, or they're not being upfront. If you identify there will be a significant cost impact, start having those conversations with lenders/investors now. Not when the costs hit. Like any other construction cost increase, waiting only makes it worse. Bottom line: Good contract language is the cheapest insurance you can buy. But like any insurance, it only works if you have it before you need it. Ultimately, it's not about panicking-- it's about being prepared and focusing on effective action to mitigate the effects of the unexpected.

The tariff storm is here. And if it’s not on your risk register yet—add it now. - Supply chains are shaking. - Material prices are increasing. - Budgets are getting squeezed. Looks like we have an escalating trade war on our hands... 📈 Steel & aluminum up 10-25% ⚡ Electrical & HVAC costs jumping 15%+ 🛑 Labor shortages driving wages higher Is your project protected? If you’re not prepared, you’re at risk of unnecessary budget overruns, supply chain issues, and profit loss. That's why I put together a free Tariff Preparedness Checklist—so you can: ✅ Assess your risk exposure ✅ Identify contract gaps ✅ Communicate better with stakeholders Here are the 9 contract provisions you must review immediately: 1. Material Price Escalation ↳ Check if your contract allows price adjustments for rising material costs due to tariffs. 2. Changes in Laws & Regulations ↳ Look how your contract accounts for cost or schedule adjustments when new tariffs or laws impact the project. 3. Delays & Force Majeure ↳ Verify if tariffs and supply chain disruptions qualify as excusable delays under your contract. 4. Change Orders for Tariff-Related Impacts ↳ Confirm whether you can request additional time or money for unexpected tariff costs. 5. Preservation of Rights for Additional Remedies ↳ Know the deadlines and documentation required to claim compensation for tariff-related expenses. 6. Contingency ↳ Determine if contingency funds can be used to offset increased material costs from tariffs. 7. Insurance & Bonds ↳ Check if your contract requires additional insurance or bonding to cover tariff-related cost fluctuations. 8. Termination & Suspension Rights ↳ Understand if you have the right to pause or cancel work if tariffs significantly impact costs or schedules. 9. Dispute Resolution ↳ Study the process (mediation, arbitration, or litigation) for handling tariff-related cost disputes. This is how you protect your project from tariff risks. Most won’t prepare. The ones who do will turn risk into opportunity. I compiled everything I know—compliance tips, risk strategies, and safeguard resources—into a short guide for project managers. It just went out to 6,400+ project leaders in my newsletter. Inside, I break down: - Why these risks matter - What to watch for in your contracts - How to safeguard your project today And more... Don’t wait for tariffs to impact your bottom line. 📩 Grab the checklist here: [Link in comments] How are tariffs affecting your projects? What are you seeing out there? Let’s talk. 👇

Tariffs can and will add extra costs, but smart planning can help you work around them (or at least, mitigate them). Instead of just looking at the tax on a finished product, think about the total cost of ownership and where tariffs hit in the supply chain. Ways to mitigate Tariff impacts: Import Raw Materials Instead of Finished Goods – Lower tariffs often apply to parts instead of full products. Pick the Right Source Country – Trade agreements can mean big savings. Modify Products for Lower Tariffs – Small tweaks in materials or design can shift them into cheaper HS Code categories. Use Bonded Warehouses & Trade Zones – Store goods duty-free until you actually sell them. Rethink Shipping Routes – Moving goods through different locations can lower overall costs. A little strategy can go a long way in mitigating tariffs impact and keep healthy margins! 🚀 #tariffs

A new 10% tariff on goods from China took effect Monday. Proposed tariffs on imports from China, Canada, and Mexico could push new home prices up by nearly 5%—about $21,000, according to John Burns Research and Consulting. Even if these tariffs never fully materialize, the uncertainty is already shaking up supply chains. 🏠 60% of hardware imports come from Canada, China, and Mexico. 🏠Three-quarters of imported sawmill wood originates in Canada. So, what can companies do right now? ➡️ Emphasize Transparent & Proactive Customer Communication: Rising costs and unreliable delivery timelines can quickly erode trust. It’s better to over-communicate than leave buyers' guessing. ➡️ Revisit Supply Chain Strategies: Consider alternative sourcing options. Diversify or near-shore to reduce exposure to sudden cost spikes. Secure alternative sourcing and build relationships to insulate against capacity shocks. ➡️ Invest in Risk Management: Build out robust scenario plans to minimize downtime and price volatility, so you're prepared for policy shifts. ➡️ Leverage Data and Analytics: Use real-time market intelligence to refine forecasting, optimize inventory to keep delivery timelines more stable, and maintain service-level consistency. An ounce of mitigation and contingency planning is worth a pound of reactive action! #tariffs #supplychain #housingmarket #homebuilding #riskmanagement #custexp #cx #erp #constructionindustry #marginerosion

Tariffs, Trade & Tomorrow – timely and well-framed discussion that echoes what many of us are hearing on the ground: uncertainty is no longer the exception—it’s the environment. With reports this week suggesting the effective tariff rate on some Chinese steel now hits a staggering 145%, the message to suppliers, specialty contractors, and project owners is clear: proactive risk management isn’t optional—it’s mission critical. Key takeaways from this piece and recent developments: 1. Lock in pricing early. Material cost volatility—from aluminum to flat roll steel—can crush margin and stall project timelines. 2. Use smart contract clauses. Price escalation and tariff surcharge provisions should be standard in today’s bids and POs. 3. Track trade developments. U.S. tariff policy can shift overnight—impacting not just steel but also HVAC, solar, and prefab components. 4. Review cross-border sourcing. If your materials touch Canada or Mexico, understand the evolving USMCA carveouts and compliance risks. 5. Plan for workforce disruption. Immigration policy changes (or the threat thereof) will continue to reverberate across construction labor markets. As construction professionals, we can’t control the tariff tides—but we can build better boats. Events like CreditScape by Credit Management Association and METALCON 2025 are the right forum for sharing strategies and forging smarter paths forward. Always happy to compare notes with others navigating this evolving landscape. #Tariffs #ConstructionRisk #MetalDesign #TradePolicy #CreditManagement #ContractClauses #METALCON2025 #SupplyChainStrategy #SteelIndustry #ConstructionEconomy https://lnkd.in/gAtrN3iA

Tariffs, while unpleasant, are just another challenge that business leaders face in the quest to guarantee the best possible performance of their companies. This weekend's #tariffs on Canada (25%, 10% on oil), Mexico (25%), and China (10%), while surprising to many business planners due to their targets, severity, immediate enforcement, and justifications, are no different. Work the problem: 🧠 Assess the immediate impact on your #costs, #profitability, and #pricing. If you haven't done so previously, engage in direct, honest, and transparent conversations with your teams, suppliers, and customers to develop a strategic response. Roll out the plan as quickly and efficiently as possible. 🗺️ Consider the medium-term and long-term implications of protectionist trade policies on your business and explore a comprehensive list of tariff mitigation strategies, including: •Strategic sourcing •Product exclusion requests •Country of origin adjustments •Value reduction/first sale tactics •Foreign trade zones and bonded warehouses •Special Harmonized Trade Schedule (HTS) provisions •Duty drawbacks 💡 Normalize a robust #risk assessment and planning process for your organization. Continuously evaluate diversification of suppliers and manufacturing locations. Conduct financial modeling of all inputs. Evaluate manufacturing process changes. Explore vertical integration and ways to eliminate intermediaries. Assess technology adoption and real time tracking of your supply chain. Don't be tariff-ied - you've got this! 💪

Tariffs, Supply Chains, and Construction Costs – What Comes Next? New tariffs on steel and aluminum are set to take effect soon, and the AEC industry is bracing for increased costs, supply chain constraints, and market uncertainty. Historical data suggests 5%-7% construction price hikes, project delays, and financing challenges could follow. But not all firms will be caught off guard. Those that adapt their procurement strategies, build flexibility into contracts, and communicate proactively with clients will be best positioned to navigate the challenges ahead. Some key insights from my latest research: ◾ Expect material price increases and potential supply shortages ◾ Reassess supply chain options – domestic sources may offer stability, but at a cost ◾ Use escalation clauses and financial hedging to protect margins ◾ Consider alternative materials like mass timber and composite systems ◾ Stay informed – trade negotiations are ongoing, and strategies need to evolve Send me a message if you'd like to see my deeper dive report into what this means for the industry and how firms can prepare. How is your firm adjusting to these challenges? #AEC #Construction #SupplyChain #Tariffs #MarketStrategy